Housing Markets, Rents, and Workers

I don’t necessarily think that heavy handed government control of the provision of goods or services is the best way to organize our society and our resources, but I do think government intervention has a place. I think markets are great mechanisms for providing goods and services efficiently, but I think it is also clear that markets leave out some individuals and even well functioning markets have their points of failure. I also don’t believe there is some sort of dichotomy between government provided services and markets that cannot be breached. I think there is a need for government action when markets break or where markets fail to address people’s needs. Housing in particular seems to be one of those spaces.
There is not much incentive for landlords to provide low rent housing options to low-income renters. In his book Evicted Matthew Desmond shows how this leads to a limited supply of low rent housing options and how that low supply artificially inflates the cost of those options. Low rent, poor quality housing often isn’t actually that much cheaper than more expensive, nicer units which makes life for those in poverty unbearable. The standard advice to middle income renters or homeowners is to avoid spending more than 30% of your monthly income on rent or a mortgage. For the lowest income people in our society, that idea can be laughable.
Desmond also shows that simply raising wages for low-income individuals is not enough to avoid the high cost of rent. The limited supply of affordable housing options doesn’t exist in isolation. It exists within larger markets and forces, and will respond to other factors in the economy. Desmond writes, “when the American labor movement rose up in the 1830s to demand higher wages, landed capital did not lock arms with industrial capital. Instead landlords rooted for the workers because higher wages would allow them to collect higher rents. History repeated itself 100 years later, when wage gains that workers had made through labor strikes were quickly absorbed by rising rents.”
This dynamic between landlords and the wages of renters demonstrates a market failure. Rents can soar to absorb an increase to a worker’s income. People need a place to live, and even if the conditions are terrible, they cannot pass up housing. But as rents take larger and larger shares of their income, they have less to spend on groceries, utilities, and other necessities or enjoyments of life. The government does help people with food and some utilities, but people can hardly engage in our capitalistic society if an overwhelming amount of income is directed toward rent. Government provided low-income housing seems to be a necessity to correct for these market failures. Clearly large, densely crowded housing projects were not the right solution, but when we look at housing across the country we see a lot of different approaches to housing. Dense housing structures are not the only option, and other alternatives for reasonable and affordable government provided housing need to be attempted to help make the housing market work for more people and avoid eating any increase in wages that people earn as they try to escape dilapidated housing.

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