Recognizing and addressing the problems of steep rent
Kai Ryssdal: President Obama had a press conference today, conveniently as Republicans in 10 states were voting in GOP primaries. The stated topic of his remarks was a new way to help homeowners refinance their mortgages.
But forget the mortgage and foreclosure crisis for a minute and think about rent. Housing prices are, overall, low. But rent in a lot of cities is high and rising. What that means for income, well-being, and life in general is the subject of a new e-book out today by Slate business and economics correspondent Matthew Yglesias. It’s called, “The Rent is Too Damn High: What To Do About It, and Why It Matters More Than You Think.” Thanks for joining us.
Matthew Yglesias: It’s good to be here.
Ryssdal: This book is — omnibus is too strong — but you roll a whole lot in here. Right? There’s a whole lot tied up in the price of where we pay to live.
Yglesias: Yeah, and I think it’s commonsense. When people talk about their own live and their family and friends, everybody knows that housing costs are a big determinant of what you do. And everyone knows that which city you live in is a really big deal.
Ryssdal: Let’s stipulate the title of this book is true, “The Rent is Too Damn High.” Let’s just, for the sake of argument, assume that it is because in some places it is and in some places it isn’t. But if it is, why does it matter? What difference does it make?
Yglesias: Right. The pattern that I noticed is that when you talk about international migration, we take it for granted that people move from poorer countries like Mexico to wealthier countries like the United States. So you might think internally you might see people moving to the highest-income, highest-wage cities. But they actually don’t. Instead, the population movement has been to places like Phoenix, places like Las Vegas. That’s because of the housing availability and the housing costs. And so we’ve got a problem over a period of decades now where people are not able to move to the highest wage, most prosperous parts of the country.
Ryssdal: Well let’s flesh out that answer a little bit and let’s go to the title of the book. It’s “The Rent is Too Damn High: What To Do About It, and” — here’s the nut graph if you will — “Why It Matters More Than You Think.” Obviously, high rent, it’s a problem. But make it make more sense.
Yglesias: Well, for one thing it just reduces the real wages that people are able to make. It also matters for working-class occupations. That if you’re talking about working in the kind of face-to-face personal services that can’t be outsourced to China, then it really matters if you can gain access to the most vibrant labor markets in the biggest, most prosperous cities. Or if you’re sort of stuck in a place where the local industry is declining and there’s therefore not good opportunities for you.
Ryssdal: The policy response in a lot of cities — New York comes obviously to mind — is rent control. Is that the answer?
Yglesias: Rent control can play a role, but if we want to expand the number of opportunities that are available to Americans on the whole, then you have to look beyond rent control. You really have to look at expanding the supply of housing stock in a given area. We have the technology to build denser, to build more apartment buildings. We don’t use it because there are zoning restrictions and there are rules against doing the building. But if you look at these high-cost cities, the majority of the price of the house is the price of the permission to build, not actually the price of constructing the buildings.
Ryssdal: The counter argument from a policy perspective of course is market forces are what market forces are, and if you can’t afford to live there, don’t live there.
Yglesias: Right. Well it is a question of market forces, but it’s a question of market forces colliding with regulatory forces. What market forces ought to do is say let’s take the most expensive land and let’s build the tallest, densest buildings on that. When you say no you’re not allowed to do that, then market forces say then you’ve got to go live some place else.
Ryssdal: Where do we go then from here? What is housing policy going to be as we get the housing market recovering and more people trying to get jobs in cities and all of that?
Yglesias: Well I think mayors looking at job creation in the short term in their cities really ought to see deregulation of the real estate development market as a huge win. If you let people build in the places where it’s most expensive, you could have a huge surge in the short-term construction employment. Looking to the longer term, I think that part of the revamping of the mortgage finance system has to be making it more friendly to cities, to density, and to high-value development.
Ryssdal: Matthew Yglesias, he covers business and economy for Slate. His new book is called, “The Rent is Too Damn High.” Matthew, thanks a lot.
Yglesias: Thank you.
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