MIT Center for Real Estate
2023
Albert Saiz
The paper titled "The Global Housing Affordability Crisis: Policy Options and Strategies," published by the MIT Center for Real Estate, addresses the urgent issue of rising housing prices that outpace income growth in various regions globally. This disparity has significant implications for well-being and social stability, prompting a call for active government intervention. The author, Albert Saiz, emphasizes that mere passivity from municipal and national governments is no longer viable. He argues that it is essential for policymakers to articulate explicit goals regarding housing policies, acknowledging the trade-offs involved in pursuing these objectives. By fostering a broad bipartisan consensus on housing and land-use policies, governments can better navigate the complexities of real estate development, which has long-lasting effects on communities. Saiz outlines thirty significant economic strategies that inform housing policies worldwide, detailing their advantages and potential pitfalls. He underscores the importance of carefully targeting subsidies to avoid negative general equilibrium effects and to make efficient use of limited public resources. The author advocates for designing housing programs that anticipate behavioral responses from various stakeholders, including individuals, firms, and governments, to ensure their effectiveness. In conclusion, the paper calls for an unideological and professional approach to implementing housing programs. By leveraging a mix of economic strategies and learning from global case studies, policymakers can create effective solutions to the housing affordability crisis, ultimately enhancing the quality of life for many individuals and families.
The Global Housing Affordability Crisis: Policy Options and Strategies
MIT Center for Real Estate Research Paper No. 23/01
55 Pages Posted: 29 Mar 2023
Albert Saiz
IZA Institute of Labor Economics; MIT Department of Urban Studies and Planning
Date Written: March 27, 2023
Abstract
Housing prices are rising faster than incomes in many areas of the world, reducing well-being and engendering social discontent. Passivity by municipal and national governments is no longer an option. In this essay, I will describe the tradeoffs between different housing policy objectives of governments and the public. I suggest that policy goals should be made explicit, and their tradeoffs acknowledged. Due to the durable impact of real estate development, housing and land-use policies should seek broad inter-partisan consensus. To avoid pernicious general equilibrium effects and because of limited public resources, subsidies ought to be carefully targeted. I will describe the thirty major economic strategies underpinning housing policies worldwide and discuss their main advantages and caveats. Effective housing programs must skillfully deploy a combination of these basic economic strategies, as I will illustrate through several global case studies. Programs should be carefully designed to anticipate behavioral responses from individuals, firms, governments, and markets. Unideological and professional implementation is critical for their success.