Housing Policy Debate has published a paper, “Housing Affordability and Economic Growth,” examining how housing affordability impacts economic growth, as measured by gross domestic product (GDP). The author, Jerry Anthony, finds that increases in household cost burdens are associated with lower economic growth. Hence, while housing affordability has traditionally been viewed as a social problem – presenting significant challenges to low-income households who pay much of their income toward rent – the research presented in the paper reveals that a lack of affordable housing also has negative economic implications.
Anthony uses data for 100 of the most populous metropolitan areas to evaluate the relationship between affordable housing and GDP. These metros house approximately two-thirds of the country’s population and account for 60% of its GDP. Anthony uses the share of cost-burdened households as a measure of unaffordability and finds that increases in the share of cost-burdened households slow economic growth. He conducts the same analysis focusing just on homeowners and just on renter households and finds that, in both groups, the relationship between housing unaffordability and GDP is similar. Anthony suggests that given this finding, any policy intervention intended to boost local economies must also address rental affordability.
Anthony hypothesizes that unaffordable housing could hamper economic growth for several reasons. It could reduce local consumption among households, for example, if most of their spending is on housing. It could also influence where companies decide to operate, as companies located in cities with few affordable housing options could experience higher employee turnover. To improve housing affordability, he suggests policy measures like zoning reform, rent control, and increased federal investment in housing development.
Read the paper at: https://bit.ly/3O2LMuq