An article at MultiHousingNews.com examines Biden’s proposals for addressing the housing shortage, and concludes,
In the end, the affordable housing problem is about money. To create housing that costs less, either the cost of construction must be reduced (not likely, given rising costs of land, materials and labor costs); developers must accept reduced profits (which would eliminate the incentive to build); or the government must provide subsidies (i.e., direct payments, rent subsidies or tax breaks for developers) paid for by tax dollars.
Unfortunately, these are false alternatives.
One reason the cost of land keeps rising is zoning, and particularly single-family zoning. Such laws arbitrarily reduce the land available for housing. For example, if a lot is zoned for single-family housing, the entire cost of the land must be built into the price of the house. However, if a developer could build multiple units on that lot, the land cost per unit is reduced. Another factor in the cost of housing is the permitting process. Numerous studies have found that land-use regulations and the associated permitting can increase the price of housing 40 percent or more.
Abolishing zoning and eliminating permitting would substantially reduce the cost to produce housing. To illustrate, let us assume that a parcel of land costs $150,000. In the current environment, that cost plus the permitting cost of 40 percent means that the land price of a new house is $210,000. However, if we eliminate the permitting costs and a developer builds five units on that parcel, the cost per unit plummets to only $30,000.—seven times less than the current cost!
Of course, zoning and permitting are not going to disappear in the foreseeable future, but the example above demonstrates that the cost of housing can be significantly reduced. For that to occur, government must restore economic freedom to housing producers.
Relying on subsidies to solve the housing shortage is nothing more than a pipe dream. Government has been trying that approach for more than eighty years. It hasn’t worked in the past and it isn’t going to work in the future. The solution isn’t more subsidies. The solution is more freedom for housing producers.