Via Brad DeLong, I see that Hal Varian has a piece in the Times on high housing prices that’s straightforward but one of the best short reads I’ve seen about the problem.
TO paraphrase Yogi Berra, it seems that houses are now so expensive that no one can afford to own one.
Of course, economists know better. In the short run, the supply of housing in most areas is more or less fixed. Hence the price of housing is determined primarily by the demand side of the market - by how much people are willing to pay for housing.
A point he makes that’s worth emphasizing is that attempts to subsidize housing costs by the city/state can further increase demand. It’s for this reason I’ve not been wowed by some of the responses of city council and mayoral candidates in addressing the housing problems here.
Also, regular reader will know I tend to have sympathy with the argument that we’re in a housing bubble right now, but increasingly I’m inclined to the view that bubble issues are mostly separate from equality of affordability. Charley at Blue Mass Group has complained that the bubble has made housing in Boston unaffordable for ordinary people, but while the interest rate trough/housing price bubble may serve as a catalyst for some of the displacement of poor/working class/petit bourgeoie residents from the city, the ultimate driver of that displacement is significantly more demand among the bourgeoisie to live inside the city. Rage against the fact that Boston has now adopted the Parisian model of bourgeois center/working class periphery all you want (I have mixed feelings), but I don’t see that dynamic abating anytime ever. What’s likely to happen instead is that city "affordable housing" policies will carve out space for city employees facing residency requirements but for very few genuinely working class folk, who will continue to feel the market pull toward second cities and less tony suburbs.
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