Date of Award
Jan Kregel, PhD
The federal government’s entry into regulating the US housing sector began with reforms initiated during the New Deal. Given the effects of the Great Depression, the New Deal was the perfect opportunity to implement housing policies that would have ensured a more equitable distribution of housing to all households, especially those which are on the lower end of the income distribution. However, as we shall see, federal housing policy has historically followed a path that focuses purely on demand-side measures. This is not by accident; the housing sector has long been seen as a macro-stabilizer that can be used to stimulate long-term growth in the economy through capital formation and employment created by the construction sector, specifically the residential construction sector. While demand-side measures are a Keynesian prescription for full employment, the lack of counter-balancing supply-side measures prevents the housing sector from achieving an equilibrium between supply and demand in both the short and long term, meaning that effective demand is never fully met. The reason for this is primarily the way in which the housing market functions; supply is relatively price inelastic compared to demand in the short run and more elastic overall in the long run. Supply is also restricted by external factors such as land use regulation. By imposing demand-side measures in a supplyrestricted market, the eventual rise in prices will tend to price out households on the lower end of the income spectrum. What results is both imminent homelessness and eventual homelessness as a result of economic rather than noneconomic conditions, which do not have supportive assistance on the homelessness policy side. This paper concludes with a proposal on how the gaps in housing policy and homelessness policy can be remedied through an increase in public housing stock combined with the Housing First1 approach; an approach that does not involve means testing and extends access to housing without the fulfillment of any prerequisite conditions.
Gopi, Athullya Biju, "The Economic Case for Housing First" (2018). Masters of Science in Economic Theory and Policy. 9.