Housing Affordability and Economic Growth

I believe good policy is informed by research, including housing policy. I came across this paper on the economic impacts of housing shortages. It's a solid read that is relevant not just to the top metropolitan areas of the country, but rural areas such as ours.

Its title is "Housing Affordability and Economic Growth," written by Jerry Anthony School of Planning and Public Affairs, University of Iowa, Iowa City, IA, USA You can read the paper at: https://nlihc.org/sites/default/files/Housing_Affordability_Economic_Growth.pdf

ABSTRACT

The U.S. has a chronic shortage of reasonably-priced housing. Decades of policy and program intervention at federal, state, and local levels has not substantively alleviated this problem. Consequently, alarmingly high proportions of the population spend over 30% of their income on housing costs and are deemed housing cost-burdened. Housing cost-burdened households have a much lower quality of life than those that are not. Thus, the housing affordability problem is a serious social concern.

Is this problem also holding back the U.S. economy? I explore whether the lack of reasonably-priced housing adversely impacted per capita gross domestic product (GDP) growth in the 100 most populous metro areas of the country. I use publicly available data for three time points (2000, 2010, and 2015) and changes in the proportion of cost-burdened households in metros as the experimental variable. I find that decreases in housing affordability had a statistically significant negative effect on economic growth in these metros. Over 80% of the national GDP is generated in U.S. metros, and increasing housing affordability there may help grow the U.S. economy. Therefore, policies to increase housing affordability, long seen as a social imperative, may well be an economic imperative also.