Patrick Tuohey: Rent control and financial assistance fail to address housing supply crisis
They say there's no place like home. But what if you can't afford a home?
Housing affordability is a critical issue in many places throughout the country. So it's surprising so many policies in this area completely ignore the core issue: Housing is either too expensive to build or barred altogether.
Any policy that fails to increase housing production will be unsuccessful. Those approaches include: rent control, financial support for homebuyers, relaxed lending standards, inclusionary zoning and direct subsidies.
That's not dry economic theory. Those things have been tried, and we know they don't work. What's worse: They often drive prices up. Let's look at each in turn.
Rent controlRent control comes with a long, well-documented history of negative outcomes. Rent control reduces overall housing supply and leads to deteriorating property conditions. A Stanford study on San Francisco's rent control found that the policy reduced rental supply by 15% as landlords either converted units to condos or withdrew them from the market. Rent control may stabilize rents for a few lucky tenants, but it leads to higher rents and fewer options for everyone else. Thankfully, 37 states restrict the ability of municipalities to enact it.
Financial support for new homebuyers is often floated as a way to increase access to housing, but it's also a flawed idea. In addition to the cost to taxpayers of these types of programs, the effort ignores basic economics: When you increase demand (via free financial support for buyers) in a situation where supply is already limited, prices go up. See also: Taylor Swift concert tickets.
Relaxed lending standardsRelaxed lending standards, another common suggestion, makes it easier for buyers with lower credit scores or unstable incomes to qualify for home loans. This approach triggered the 2008 financial crisis: Lenders were encouraged to loan to people who were previously deemed too risky, leading to widespread defaults and a housing market collapse. While relaxed lending might temporarily boost homeownership, it sets up some of society's most vulnerable buyers for failure and creates systemic risks that can (and did) destabilize the economy.
Inclusionary zoningInclusionary zoning, a commonly invoked local development policy requiring developers to include a percentage of affordable units in new projects, catches a lot of attention because it seems free — it shifts the burden of affordable housing onto builders. Yet despite good intentions, it often backfires by discouraging construction. A study published by the Department of Housing and Urban Development found that inclusionary zoning "increases house prices and reduces housing supply." Why? Because developers forced to sell or rent units below market value will either recoup those losses by raising prices elsewhere or avoid building altogether. A few tenants may benefit from subsidized units, but everyone else faces higher costs and fewer options.
Cities also frequently offer tax breaks or subsidies to developers in exchange for building affordable units. Programs like the Low-Income Housing Tax Credit aim to do this but are often inefficient and wasteful. A 2017 study found that because states rarely target the location of such construction, the credit decreases the supply of subsidized units in the exact places where they are needed. These complicated incentives enrich developers without delivering meaningful increases in affordable housing supply.
The solution?The solution to all of these bad ideas is the same: make it easier to build more housing. This is so obvious that even fans of government regulation Presidents Joe Biden and Barack Obama have conceded it. Yet too many local policymakers and housing activists have failed to understand this, and so they push forward with counterproductive big-government ideas.
Meanwhile, in cities where the housing supply has increased, prices have dropped. New York University School of Law professor Vicki Been, co-author of a March 2024 study on the effect of housing construction on prices, concludes it really is that simple. She told CityLab, "All of those central arguments of the supply skeptics are being refuted."
Superficial gimmicks that don't address barriers to construction turn one problem, scarcity, into two problems, scarcity and taxpayer funded subsidies. Cities need to encourage housing construction, of all types and at all price points.
That is the only housing policy worthy of the name.
Patrick Tuohey is co-founder of Better Cities Project , a 501(c)(3) nonprofit focused on municipal policy solutions, and a senior fellow at the Show-Me Institute, a 501(c)(3) nonprofit dedicated to Missouri state policy work. He wrote this column for the Kansas City Star.
