Policy Options Abundant to Improve Housing Affordability for Families

Vanessa Brown Calder

There are many policies that reduce the supply of goods and services that parents and children need, and therefore lead to rising costs for family necessities like food, housing, clothing, transportation, and childcare. Policies including tariffs, regulations, and licensing rules reduce affordability, while the value of parents’ wages erodes due to historically high inflation.

However, housing arguably constitutes the most substantial and most inescapable financial costs associated with raising a child. U.S. Department of Agriculture figures indicate that for families, the cost of housing is the largest expense associated with raising a child, with estimates suggesting housing accounts for 26 to 33 percent of child rearing expenses, which translates to approximately $3,000 to $7,000 annually (2022 dollars).

The cost of housing as a proportion of overall childrearing expenses grows as income falls, so that for families with the lowest incomes the cost of housing constitutes a more substantial portion of childrearing costs. Moreover, although housing affordability metrics arguably overcount affordability problems due to flawed or missing income survey data, using a traditional affordability metric Department of Housing and Urban Development (HUD) data indicates that around 30 percent of children in 2019 lived in households with a housing cost burden over the traditional 30 percent affordability threshold.

During the pandemic, the costs of homeownership and rent grew further and created additional pressure on family budgets as supply chain delays and labor shortages produced upward cost pressures. And unfortunately, in 2022, housing affordability remains low: for example, the National Association of Homebuilders/Wells Fargo Housing Opportunity Index found that just 42.2% of homes sold in Q3 were affordable to families earning the U.S. metropolitan median family income of $90,000. This constitutes the second quarterly record low for housing affordability since the Great Recession.

Although some of the causes of price growth were related to pandemic-specific circumstances, other factors contributing to housing affordability challenges were and are worsened by ongoing federal, state, and local policy. These factors are summarized below and described in greater detail in the Cato Handbook for Policymakers Housing Affordability chapter, and forthcoming Empowering the New American Worker chapter by the same name.

Of course, a leading contributor to housing affordability problems remains the many regulations that limit housing supply, including land use or zoning regulations. Many research papers tie land-use regulations to increased housing prices. One influential study from 2003 found, for example, that zoning regulations pushed up the cost of apartments by around 50 percent in Manhattan, San Francisco, and San Jose.

These regulations determine the height, width, architectural features, and use of a given property, and they subject development to lengthy review processes with many veto points. They also limit cost-effective housing options like manufactured housing and modular homes, which cost significantly less per square foot than traditional housing.

In addition to local policies, federal tax, trade, and lands policies increase the cost of housing for families. For example, although tax deductions were temporarily modified via the 2017 Tax Cut and Jobs Act, these reforms are currently set to expire, and a portion of both deductions still remain. Research finds that state and local tax (SALT) reform under TCJA reduced housing price growth, especially in high-SALT and high-cost counties, so these reforms should be made permanent and deductions eliminated completely.

Meanwhile, tariffs increase the cost of a variety of construction materials and other home goods, including lumber; plywood; nails; shelving units; kitchen racks; steel sinks; cabinets and vanities; wood molding and other millwork products; quartz countertops; ceramic tile; washing machines; solar panels; and a wide array of aluminum and steel products used to build housing. Anti-dumping or countervailing duty measures, import taxes, and continuing expansions in tariff scope are to blame. Recent estimates indicate that tariffs’ impact on the cost of housing materials ranges between 1.4 percent for kitchen cabinets to 22.4 percent for vinyl flooring.

Finally, there is evidence that federal lands policy limits housing supply in western states like Nevada, Utah, and Idaho, where the federal government owns a majority of the land. This has become more of a salient issue as western states have sustained some of the highest net migration during and after the pandemic.

A recent study finds that a reform that would allow local governments to nominate and purchase federal land and then develop the land for housing projects that meet certain density criteria could lead to the construction of approximately 2.7 million homes, including 430,000 homes in San Diego County, California; 350,000 homes in Maricopa County, Arizona; 109,000 homes in Clark County, Nevada; and 55,000 new homes in Utah County, Utah alone. As a result, an additional 8 percent of the population in twelve western states would be able to afford an average home (a 24 percent increase from the baseline).[i]

Between federal and local policy reforms, there are abundant opportunities for policymakers to improve housing affordability for families. In order to increase housing affordability for families, policymakers should eliminate zoning and land use regulations, make TCJA reforms to property and mortgage interest deductions permanent, eliminate Section 232 tariffs on steel and aluminum and Section 301 tariffs on Chinese imports, end Department of Commerce policies that ensure antidumping and countervailing duty restrictions, and pass federal land reform legislation, like the HOUSES Act, among other things.

The significance of housing access and affordability for families cannot be overstated, and it extends beyond considerations like comfort and convenience alone to issues like education, opportunity, and community life. Hopefully, pro-family policymakers understand the stakes and act accordingly.