- July 7, 2021
For the most part, the affordable housing discussion in Sarasota is increasingly sensible and productive. For example, in June the Tiger Bay Club hosted a panel discussion that was smart and interesting, and showed some real progress on grappling with barriers to more affordable housing.
But that forum also highlighted some of the myths about affordable housing I keep seeing pop up:
1. Average salaries and average home prices in a city need to be aligned, and policymakers need to address the gap;
2. We can create affordable housing by mandating that developers sell some new units in every development at much lower prices.
These myths are at best a distraction from tackling affordable housing, and at worst actually make housing more expensive.
Housing and labor markets are not the same market
I have repeatedly seen graphs showing that average salaries paid for many good jobs in Sarasota are not sufficient to pay average home prices in the area. Usually the graph is part of an argument that the region will have a hard time employing workers who can’t afford to buy a home here. But let’s break that issue down.
For starters, the market for labor and the market for housing are very, very different. Labor is very mobile, as people move to chase jobs or better pay all the time. Supply and demand for labor change a lot and rapidly with changes in the national, regional and local economy. Housing is not mobile, and supply and demand change much more slowly — especially supply.
If businesses have a hard time finding certain professional workers at the salary they are offering, they will raise salaries to attract the workers they need. Meanwhile, if demand for housing is high, developers will start working on new projects and eventually supply more housing.
The fact that salaries for so many jobs in Sarasota are less than that needed to afford to buy a house is a clear indication that a number of things are going on. Clearly enough workers are willing to come to Sarasota for that level of wages. And they are clearly able to find a place to live. People who can’t afford to buy a home—or simply don’t want to—rent one. There is nothing wrong with that and no reason to say everyone needs to be able to buy a home, especially early in their career. Finally, many people have a partner who also works, and the combined household income is enough to afford a home. Comparing average salaries to housing prices assumes only single-worker families are trying to buy homes, which is usually not true at the affordable housing level.
Put simply, the labor market in Sarasota is adjusting all the time, and fairly quickly. If we allow the housing supply to adjust too, even if slower, things will balance out. Especially if we let go of the strange notion that everyone needs to be able to buy a house, rather than embrace the idea that everyone needs to be able to find a good place to live.
Wealth vs. youth
A special version of the concern about Sarasota area incomes vs. housing prices is the concern about a “brain drain” of young people leaving Sarasota because they can’t afford housing here, which surveys by the Sarasota Chamber of Commerce indicate is a real problem.
But this is a harsh reality of living in a place that is so desirable, especially to those with wealth. Wealthy, older individuals are competing with young workers for housing, and the wealthy can simply outbid them. As long as supply of housing is less than demand, the willingness of the wealthy to pay more will drive up housing prices.
Young people who want to live in Sarasota will have to be creative. Just like young people who want to live in Manhattan, they can’t expect to live like the wealthy, many of whom are reaping the benefits of decades of hard work themselves. Renting, roommates, longer commutes, smaller housing, older fixer-uppers, etc. are all part of the mix.
Affordable housing mandates don’t work
Too many people think we can just force builders to build housing and sell it at “affordable” prices. But the data from places that have done this show it results in fewer homes being built and raises average prices of homes. For example, in the Los Angeles region affordable housing mandates led to 770 affordable units being sold over seven years, while during the same period reducing the total number of new units built by more than 17,000 and raising the average home price by about $50,000.
Just think about it logically. In a market where homes are selling well, if a developer has to sell some units at below market prices, he will have to simply raise the price of the other units to pay the difference. That price hike means some people who could afford to buy a new home at market prices now cannot. So the mandate makes some people able to afford housing while making others unable to do so.
Worse, many developers just go to the next county to build, reducing the local supply of housing, again driving up average prices, and spreading regional housing over a broader area. It is a vicious spiral that makes housing less affordable, not more.
Stick to our knitting
The most important way to reduce the cost of housing in a region is allowing the supply of housing to keep up with demand. This does not mean new housing has to be cheap housing either, because cheap housing tends to be the older, smaller homes, freed up for young workers or lower income families when wealthier people move into new, higher-priced homes. That is how the housing market has worked in modern times, and too many people forget that and think the young and lower earners need to be able to buy new houses.
At the same time, the city and county governments need to work with developers who want to build affordable housing projects, especially rental units. Again, the historic reality of housing markets shows that this is where people entering the market, or having hard times, get their housing. Adequate supply that grows with demand is vital here as well to keep prices reasonable.
Finally, city and county governments need to ensure the regulatory process for new development flows smoothly. A well-functioning process for working with developers is crucial to allowing the supply of housing to keep up with demand and keeping prices in balance.
Adrian Moore, Ph.D., is vice president of Reason Foundation, co-author of the book “Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century,” and lives in Sarasota.