The Economic Argument for Affordable Housing: Building Secure and Stable Communities

Over the last few decades, housing has become increasingly financialized, with homes being treated as financial assets first and somewhere to live second. This attitude has separated housing from its core function of providing secure and stable homes for middle and low-income families, which has negatively impacted families, communities, and local economies. For example, rent and house prices in the EU have increased dramatically since 2010 (by 18% and 49% respectively), which has steadily squeezed out many potential homebuyers or left homeowners with little money left over.?

This economic pressure has forced middle and low-income homeowners to make difficult budget trade-offs that can lead to serious negative consequences. Research shows that when families do not have enough income left over to cover the rest of their household budget, children experience poorer health outcomes, lower levels of engagement in school, and mental health problems. Nearly every community is impacted by a lack of affordable housing, whether directly or indirectly.?

To address the affordable housing crisis, the public sector needs to take a central role in the process, engaging the private sector with strong policies that encourage the creation of more housing supply. One step in the right direction is to tackle the deep-seated resistance that many countries seem to have toward apartments. People living in anglophone countries are much more negative about living in apartments or having them built nearby when compared to other nations. This is reflected in many countries’ zoning laws, which often limit or ban the construction of apartments in or around most neighborhoods, driving up the cost of newly built housing and limiting the market’s ability to respond to demand.

Yet to truly increase housing affordability, the public sector must work with the private sector to develop better regulatory policies. For example, the Flemish Housing Minister Matthias Diependaele recently announced that €575m will be set aside for the construction of up to 6,000 rental homes. A third of the development will be rented out by social housing companies, while another third will be used as affordable private housing. This is just one example of how the government and the private sector can work together: from establishing affordable housing funds to streamlining the processes for approving developments that meet zoning laws, there are many ways governments can guide private companies toward business ventures that would serve the public’s best interests.?

Tackling the housing affordability crisis will be no easy task, requiring a concerted effort from the private sector and at the federal, state, and local levels. Nevertheless, this is an issue that cannot be ignored. A lack of affordable homes negatively affects everyone, so we will need a collaborative effort to move forward.?