Property-rights and housing-affordability advocates were surprised and elated that the chair of President Obama’s Council of Economic Advisors, Jason Furman, gave a speech blaming housing affordability problems on zoning and land-use regulation. They shouldn’t be: while Furman is correct in general, he is wrong about the details and the prescriptions he offers could make the problems worse than ever.
There is no doubt, as Furman documents in his speech, that land-use regulation is the cause of growing housing affordability problems. Yet Furman fails to note the fact that these problems are only found in some parts of the country. This is a crucial observation, and those who fail to understand it are almost certain to misdiagnose the cause and propose the wrong remedies.
Citing Jane Jacobs (who was wrong at least as often as she was right), Forman blames affordability problems on zoning that “limits density and mixed-use development.” Such zoning is found in almost every city in the country except Houston, yet most cities don’t have housing affordability problems. Thus, such zoning alone cannot be the cause of rising rents and home prices.
Based on this erroneous assumption, Furman endorses what he calls the administration’s agenda, which is its Affirmatively Furthering Fair Housing program. Rather than making housing more affordable, this program is aimed at ending racial segregation of middle-class suburbs by requiring the construction of multifamily housing in suburbs that are not racially balanced relative to their urban areas. It assumes that multifamily housing is less costly (and thus more affordable to low-income minorities) than single family, but that is only true because units are smaller: on a dollar-per-square-foot basis, multifamily costs more than single family, especially for mid-rise and high-rise apartments. Multifamily also uses more energy per square foot than single family, which means heating bills will be higher.