(You can read part one in this series here.)
It is often taken as gospel by some local (and many national) media outlets that “affordable housing” is elusive for Americans. While that is certainly true in places such as New York and San Francisco, high housing costs are often due to bad government policies, not just housing demand. A city with a solid economy and ample developable property can still experience an affordable housing problem if policymakers distort their housing markets with unwise housing policies.
For instance, rent controls freeze rents for some below market rates and can disincentivize the improvement of existing rental properties. It also deters investments in new housing that may be more affordable to the public and can put downward pressure on the rents of older properties. Government meddling in the housing market could be dissuading market participants from meeting each other’s needs.
Rent controls aren’t the only supply-limiting policy that can reduce affordability. Washington, D.C. is one of the most expensive cities in the country to rent or buy a house, and that’s in no small part due to government interventions such as the 110-year old Height Act. The Height Act, a federal law, caps buildings in the nation’s capital at 160 feet, making it impossible to convert low-lying properties into high-density high rises.
For perspective, the tallest residential building in Kansas City, the Power and Light Building, stands at 481 feet—three times Washington, D.C.’s height cap. The reason for the D.C. law is aesthetic—to keep buildings in the city shorter than the Capitol Building—but the practical effect is to drive up the price of available housing for all residents by reducing housing supply. Again, this isn’t the market failing; it’s the government failing.
State and local governments can also impose costs on the provision of housing through other regulatory practices. For example, land use limitations prohibiting multi-family dwellings on single-family lots, particularly in dense urban settings, can prevent obsolete structures from being replaced with housing consistent with present day housing stock needs. Needless red tape slowing the construction of new housing stock or slowing its development can also be a barrier to lower prices.
For its part, the City of Kansas City doesn’t have rent controls, nor are its other regulatory excesses terribly pronounced. There is also plenty of developable land throughout the region, even if such burdensome limitations were in place in Kansas City proper. Knowing all of this, the basis for Kansas City’s “housing crisis,” if it exists, would not seem to be closely correlated with government policies regionwide.
If Kansas City has an affordable housing problem, could it have more to do with how it’s defined? More on that in the next blog post.
