How to Fix The Housing Crisis
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Eighty-one percent of people think it's a bad time to buy a home, and they are right.
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I am going to explain simply the number one factor that can help improve the housing situation.
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We are living in a time where prices are too high, interest rates are crushing potential homeowners' dreams, and we can't seem to get a foothold on it.
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But the real problem is a very basic issue.
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We have to go back to your ECON 101 class in high school to nail this down.
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We have a supply problem with way too much demand.
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We do not have enough housing to meet the demand of folks who want to buy a home.
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This causes multiple issues. One of which is that housing prices are skyrocketing. This also causes rent prices to shoot up because the supply of houses is so low that everyone has to rent.
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Therefore, rent demand is also much higher.
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How do we solve this?
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Build more houses.β
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This should honestly be a higher priority than it is in the U.S. right now.
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This would fix three essential things:
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- Reduce the price of housing. No longer do we have to get in a bidding war with other millennials and Gen Xers to buy any affordable house. Instead, prices would eventually normalize and become much more affordable than the cost of living and wages.
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- Reduce the price of rent. For those who have no interest or cannot afford to buy a house, the price of rent will come down. This is because the would-be homeowners will be out of the rental pool and be able to afford a house.
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- Help with inflation. Housing has been a huge contributor to the inflation problem.It can help tremendously by solving a number of different issues.
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What are some of the ways this can help with inflation? A Deeper Dive:
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You may be saying to yourself, well how can this help with inflation. Never fear, ya boi has your back. Here are 5 things it would do.
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1. Lower Housing Prices: High demand and low supply of housing have led to skyrocketing home prices. By addressing the supply shortage (by building more), prices could stabilize or decrease. Lower home prices mean that people spend less on purchasing homes, which can reduce the upward inflation pressure, as housing costs are a significant component of inflation indexes like the Consumer Price Index (CPI).
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2. Decreased Rent Costs: We already discussed this but itβs worth mentioning again to show the impact on inflation. Similar to housing prices, rent prices have also increased due to the supply-demand imbalance. By increasing the housing supply, more people can move into homeownership, reducing the demand for rental properties. Lower rent prices would directly decrease the cost of living for renters, contributing to lower overall inflation, especially in the CPI's housing component.
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3. Increased Disposable Income for Other Spending: When people spend less on housing, they have more disposable income for other goods and services. This effect can be double-edged: it can stimulate economic growth by increasing consumption, but if the supply of these goods and services doesn't keep up with increased demand, it could potentially add to inflationary pressures. However, in a balanced economy,an an increased supply in housing leading to more disposable income can foster sustainable economic growth without necessarily fuelling inflation.
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4. Reducing Speculation: High housing costs and expectations of future price increases can lead to speculative buying, where investors purchase homes not to live in, but rather to sell at a higher price later. This speculation can drive prices up even further. By stabilizing or reducing housing prices, the incentive for speculative buying decreases, which can help stabilize the market and reduce one of the drivers of inflation.
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5. Overall Economic Stability: High housing costs can contribute to financial instability for households, leading to decreased consumer spending in other areas, increased debt levels, and potential increases in defaults on mortgages and rents. Addressing the housing issue can lead to a more stable economic environment, fostering conditions that are less conducive to inflation.
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If you canβt tell I like this stuff. I was an ECON major in my college undergrad. In any event, it is important to vote for more housing to be built where it makes sense. This is an instance where a vote at the local level can help impact your wallet.
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