Letter to the Editor: There Is No Market-Based Solution to The Affordable Housing Problem

Dennis Paulaha, PhD, Great River Coalition

When we talk about affordable housing, and the affordable housing problem, we have to be careful.

If we look at single-family houses, we can say every single-family home in Minneapolis is affordable to someone. Not everyone can afford to buy and maintain a $10 million house with $70,000 a year property taxes, but someone can. In fact, more than one person or family can afford to buy that house, although not every one of them will choose that particular house over some other alternative.

The same is true for every single-family home in Minneapolis; regardless of its price, each is affordable to someone.

Of course, the other truth that matters is, not everyone can afford to buy a single-family house in Minneapolis.

In other words, we know there are thousands of individuals and families in Minneapolis, or who would like to move to Minneapolis, who cannot afford to buy any single-family house in the city.

The question is: Should we worry about individuals and families who cannot afford to buy a single-family house but can afford to pay market rents?

Some, especially city officials, say, no. They say, as long as individuals and families can afford to pay market rents, there is no problem. In fact, the belief that renting is in some way equivalent to owning is at the core of the Minneapolis 2040 Plan, a plan that assumes being able to rent an apartment is as good as being able to buy a single-family house, a plan that, because of that belief, intends to replace single-family homes, each of which is affordable to someone, with rental units, a plan that intends to force thousands of families into being renters for life, which, as the studies show, is the single-most important factor in creating the downward spiral that has kept blacks and other minorities poorer than whites.

Which means a plan that gives thousands of families no choice but to be renters for life by eliminating thousands of single-family homes is a plan to intentionally push thousands of families, black and white, into long term poverty by eliminating the opportunity for them to accumulate equity through ownership.

As such, to an economist, it is a solution to a problem that is not only unconscionable, but by destroying the wealth of the city and forcing middle-income families to move to suburbs or to other cities, is also bad for the economy of the city.

Very simply, ownership matters, and finding ways to increase ownership should be a major part of any responsible city plan.

THE REAL AFFORDABLE HOUSING PROBLEM

The affordable housing problems all cities should be focused on must address three groups of people. People who have jobs but cannot afford to purchase single-family homes, people who have jobs but cannot afford to pay market rents, and the homeless.

And none of them will be helped with plans that, either implicitly or explicitly, are based on the idea that if not everyone can afford to buy a single-family home, single-family homes should be torn down and replaced with little apartment buildings.

That’s a little extreme sounding, but it’s pretty much what the Minneapolis 2040 plan is doing. It is based on the idea, or fact, that not everyone can afford to buy a house in Minneapolis, which, of course, is true, not only in Minneapolis, but in every other city in America and the world. But that is not a reason to push for the tearing down of single-family homes, each one of which is affordable to someone, and each of which can build wealth through equity for an owner, and replace them with rental units in which renters cannot accumulate equity.

Most important is the fact that “market solutions” to the affordable housing problem for people who cannot afford to either purchase a home or pay market rents are non-solutions, or, at best, false solutions that will help a small number of individuals and families.

A better way to look at affordable housing is to begin by protecting single-family homes and to then focus on increasing incomes that are not high enough to afford either purchasing single-family homes or to pay market rents.

That is where the real problem lies.

And it is a problem that will be made worse, not better, by city plans based on the assumption that the private sector can solve a problem it cannot possibly solve.

In a February 16, 2020 article by Natalie Hall in MplsStPaul Magazine, a quote by Rep. Illhan Omar makes the homeless problem clear. “On a single night, over 10,000 people in Minnesota were homeless last year – the highest number ever recorded. 6,000 of them were youth – which means children are showing up at school without a place to go home to.”

The article also pointed out that all public housing units in Minneapolis are already occupied, and when the city created a waiting list, 17,000 people signed up in six days, many of whom will have to wait ten years for an opening.

It is easy to find articles describing the horror of homelessness.

It is even easier to find articles describing and lauding the huge number of apartment towers being built in Minneapolis, whether it is in Uptown, the “hot” Northeast, or the newly “hot” Southeast. And.although some promise token “affordable” units, most units are far from affordable to those earning less than 30 percent of the city’s median wage.

Which, to an economist, means the $1 trillion Homes for All Act introduced by Rep. Omar and discussed in the MplsStPaul article is, whether or not it passes, a recognition that the nationwide affordable housing problem requires solutions that include direct actions by federal, state, and city governments.