Fewer Restrictions on Lending Can Make Housing More Affordable

"There are certainly many areas where regulatory barriers to building need to be eliminated in order to keep housing affordable throughout the United States. That should certainly be the priority of government at all levels. Yet today there are many areas in this country where those barriers aren’t the binding constraint that is blocking supply and pushing up rents. Those cities do lack adequate supply today, but it is because they lack suppliers. They lack potential home buyers. Potential home buyers frequently need mortgages. The most direct and immediate boost to housing supply that HUD could create today would be to increase suppliers, to broaden the availability of mortgages to households that have been locked out in one way or another from today’s market. Trends in prices, building, and borrowing suggest that many of those potential buyers would buy more affordable and more modest homes than the homes that are bought by buyers who can qualify today. The most important task for HUD today is to figure out what is preventing the construction of homes that would sell for less than $200,000. The answer to that puzzle is surely a bit counterintuitive, because it is clear that more broad-based lending and more residential investment will be required for that to happen. The families that would use that funding, for the most part, aren’t living under a bridge or in a car today. They are stacked into the existing housing stock, where they frequently spend much more on rent than they would need to spend on a mortgage to buy that very same house. Spending less on rent must begin with spending more on residential investment."