Market-Oriented Reform Principles and Policies That Would Help the Housing Market

Introduction: In this election year, Congress and the President are feeling the urge to help Americans affected by rising housing affordability pressures across the country. With the status-quo untenable, Congress and the President are itching to address housing affordability, availability, and other community needs. Before springing into action, our leaders need to first establish clear reform principles around which to design policies. The following offers such a set of market-oriented principles and policies that contrast sharply with President Biden’s analysis and plan . Reform Principles Any action needs to create more supply with the aim of creating a lasting, rather than a temporary, solution. The broad consensus among academics and think tanks is that the lack of supply, which is estimated in the millions of homes, is the root cause for housing unaffordability. Any action needs to free rather than hinder the market. The housing deficit is also too big to be meaningfully reduced exclusively through increased government spending. Any action needs to focus on programs with a proven track record or a reasonable prospect of success. Past and future programs need to be rigorously and independently evaluated on a cost-benefit basis before being implemented, continued, or expanded. Any action, while this housing shortage persists, must not create more housing demand. Demand boosters are counterproductive, as the additional demand is capitalized into higher home prices, thus further worsening affordability pressures. Any action should create a safer and more stable housing finance system that promotes the interest of all Americans. PDF to full report