In 2008, the United States economy officially took a nosedive and the country reeled from what was then called the “worst financial crisis since the Great Depression” (Domitrovic). Worse still, this completely “avoidable” catastrophe took a swing at Fannie Mae and Freddie Mac; dealt a decisive blow to Wall Street; saw numerous well-earned bailouts; and, brought middle-of-the-road, Main Street America to its knees (Chan). Since then, Wall Street and the housing market are faring better and credit is easier to obtain (Domitrovic). Main Street, however, is still waiting for better-paying jobs. While things are steadily improving elsewhere in the economy, high demand for affordable housing has not led to more affordable housing for those in need.
In fact, there are 19.4 million rent-burdened households and the cost of rent is rising. Twenty-five percent of Americans pay half of their income in rent, even though they are making less money and even though developers have many incentives (tax breaks, more financing, and zoning authority) to build affordable housing. While it seems that high demand and numerous incentives to provide affordable housing should equal more affordable housing, the reality is not so simple (Dietz; No Plans to Build Low-Income Housing; 69% of New Yorkers Vote for Guaranteed Inclusionary Zoning).The basic rules of supply and demand do not apply here.
One hurdle to affordable residences is would-be neighbors to residents of low-income housing. Diamond Bar, an affluent city in East Los Angeles, has many residents who are unhappy with proposals to build low-income housing in their community (No Plans to Build Low-Income Housing). While residents here worry that the home values will drop and that they will be plagued with increased traffic and crime, New York welcomes affordable housing to no avail (No Plans to Build Low-Income Housing; 69% of New Yorkers Vote for Guaranteed Inclusionary Zoning; Dietz). Sixty-Nine percent of New Yorkers are in favor of more affordable housing, yet, “less than 3% of the Multifamily housing developed since 2005 has been affordable [or] inclusionary.” Despite incentives to “build up,” two-thirds of new development is luxury (69% of New Yorkers Vote for Guaranteed Inclusionary Zoning). Developers willingly ignore demand to provide housing to the wealthy.
The economy is getting better but the need for affordable housing is becoming more incessant. So far, the government has incentivized affordable housing but has had little response from developers who prefer to pursue more profitable angles. Unfortunately, the economy hangs in the balance in a true collective action problem that, once resolved, could yield numerous benefits for the rest of the economy.
69% of New Yorkers Vote for Guaranteed Inclusionary Zoning. Publication. Association for Neighborhood and Housing Development, 26 Aug. 2013. Web. 03 Oct. 2013. <http://www.anhd.org/3447
Chan, Sewell. "Financial Crisis Was Avoidable, Inquiry Finds." The New York Times. N.p., 25 Jan. 2011. Web. 3 Oct. 2013. <http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html
Dietz, Robert. "A Win-Win-Win for Affordable Housing." U.S. News News World and Report. N.p., 5 Sept. 2013. Web. 3 Oct. 2013. <http://www.usnews.com/opinion/blogs/economic-intelligence/2013/09/05/defending-a-tax-program-that-helps-provide-affordable-housing
Domitrovic, Brian. "The Worst Economic Crisis Since When?" Forbes. Forbes Magazine, 05 Feb. 2013. Web. 03 Oct. 2013. <http://www.forbes.com/sites/briandomitrovic/2013/02/05/the-worst-economic-crisis-since-when
"No Plans to Build Low-Income Housing, Say City Officials." DiamondBar-Walnut Patch. Ed. Gina Tenorio. N.p., 27 June 2012. Web. 3 Oct. 2013. <http://diamondbar-walnut.patch.com/groups/politics-and-elections/p/no-plans-to-build-low-income-house-say-diamond-bar-ci789863b94c