I get the sense sometimes that our national policies are being crafted on the “ready, shoot, aim” principle.  Regardless of where you stand on the health care issue, for example, you cannot be happy with the way this process is being conducted: instead of reasoned analysis of the problem, a careful consideration of the alternatives and an exploration of what has been tried, we’re getting a kielbasi that no one is going to like.

Affordable housing is one of those catch-phrases like “green development” and “smart growth” that we all want to feel good about, and feel we are part of the solution for, but is there really a problem?  Certainly from my perspective as someone that spent a large part of his growing years in the Third World, I can vouch for the depravity of housing conditions in many countries…the worst ghetto in St. Louis would look like luxury housing to a resident in one of Sao Paulo’s favellas (slums).   I’ve done some thinking on what affordable housing is, or should be, and figured out that if I had just started Googling the term, I would have gotten an answer quicker.  Fortunately, where I arrived at upon reflection was pretty close to accepted standards nationally and internationally.  I approached the definition from the perspective of needs and decided that a person’s base needs are food (first), shelter (second), clothing and ancillaries to allow one to be a productive member of society (third).  Thus, I decided that “affordable housing” should comprise no more than one-third of an individual/family’s ability to produce income.

The folks over at demographia.com agree, and it is close to the standard we have used in leasing and selling housing these past twenty years. Here’s their formula – they call it the “Median Multiple,” and base it off of median income:

Now, with that as a standard, the folks at Demographia take a look at housing markets in the United States, Canada, Ireland, the United Kingdom, Australia and New Zealand and come up with some pretty interesting stats:

By this measure, ONLY Canada and the United States have affordable housing markets!  Fully 44% of our markets that were surveyed are “Affordable,” 78% are “Affordable” or “Moderately Unaffordable.”  Our median affordability at 3.2 is a full two points below the next most affordable, the UK.  This data reflects survey results from the 3rd Quarter of 2008 to boot, which means that the average 25-30% declines are not priced into these numbers.

Demographia’s agenda is to promote free market economy and to get rid of land restrictions and such…they are opposed to “smart growth” tagging that pattern of development with less affordable housing.  Here’s a chart they present on housing affordability versus land rationing which is interesting:

But that’s not my fight.  (To download the whole report, go to Demographia.com.)I lean towards the pattern of smart growth development as a means of being good stewards of the land although the data provided does indicate that we need to be smarter about our smart growth.  No my fight is with policy folks at the national scale that got us into the financial mess we are struggling through.  A big part of the push for exotic lending instruments came from the Federal Government under the premise that housing was unaffordable.  The inconvenience of facts is that this premise was false.  And if we apply our old syllogistic logic skills, where A=B, B=C, Therefore A=C…if A does NOT equal B, it cannot equal C and all the measures that were put in place.  Initiatives like the Community Reinvestment Act of 1977 and it’s expansion in 1999 along with the pressure put on Fannie Mae and Freddie Mac to purchase subprime loans all under the rubric of “doing good,” has led to this disaster.

We have nurtured the belief that the American dream is for everyone to own their own home.  We have structured our tax policy around this belief and now we are paying the price for the mistaken belief that housing should be made affordable to EVERYONE, and that the U.S. taxpayer would subsidize any shortfall or failure.  It is time to push for a more sane housing policy.  One that acknowledges that renting is an extraordinarily good option.  We have culturally gotten away from the notion that you have to save up to buy the house with the white picket fence on the edge of town; we have made it a right, an entitlement. If we are going to recover with a robust economy, we had better get back to the basics and acknowledge that housing is not a “crisis” that needs intervention.  Housing is a matter of local preference, let’s get back to the place where each municipality determines their own housing policies and needs.

Here’s Ellen Greene in the 1986 movie, “Little Shop of Horrors,” to take us out with “Somewhere that’s Green:”