Affordable housing isn’t quite the problem now that it was during the bubble, but there is still a lot of ingrained exclusivity in the system that keeps us from providing affordable housing as efficiently as we did in the past. Apartments above shops, granny flats, shared-houses, the places that served as affordable housing for most of American history are now illegal in a very large part of America.
Matt Yglesias adds an interesting twist to the story with a table comparing housing attributes in 1900 and 1990. As the table makes clear, a lot of things have gotten unquestionably better. Running water, electricity, heat, all enjoyed by virtually all homes now (or rather by 1990) and few then. But one statistic jumps out that informs the question of affordable housing: In 1990 24% of American households put up a boarder or lodger. That is to say, nearly a quarter of all American homes included at least one person who wasn’t a member of that household, but paid rent for access to a room. In 1990 that same statistic was down to 2%. What was an extremely common form of affordable housing, perhaps the country’s most common, is now effectively unheard of.
I can think of a few theories that might account for why such a common attribute so completely fell off the map: migration away from rural areas, income homogeneity in post-war suburbs, World War II itself and the GI Bill, exclusivity regulations as mentioned in the first paragraph, etc. But no matter why or how the common lodger ceased to exist, the effect has been that by removing such a sizable chunk of housing from the affordability market we have increased the demand for affordability by other means. The folks who might otherwise live in a rented-out basement are instead trying to find their own dedicated unit. That drives up demand for dedicated affordable units, which unless coupled with an equally dramatic increase in supply, inevitably drives up their cost in turn, making fewer and fewer of them affordable.
The only way out, short of hoping the economy never recovers, is probably to make it legal and much easier to provide a large number of affordable units, either as accessories to other units or on their own. Developers, after all, will build to fill any niche market they can find, provided they are permitted to do so by law.
