The Affordable Housing Shortage:
Considering the Problem,
Causes and Solutions

Banking and Policy Working Paper 2-02

Author:
    Ron Feldman

Paper, updated August 2002 [128K PDF Format]

Many observers claim that we are in the midst of an “affordable housing shortage” or, even worse, an “affordable housing crisis.” The primary concern is that too many households live in “unaffordable” rental units. We hope to clarify the current debate by first measuring the size of the problem, then diagnosing its underlying causes and, finally, discussing treatments that policymakers should consider. While our review is hardly exhaustive, we conclude that a shortage of income is largely behind the housing affordability problem despite the current focus on housing. Policymakers should recognize that government financing of new housing units is unlikely to be a cost-effective response to low household income.

The author is assistant vice president in the special studies and policy section of the Federal Reserve Bank of Minneapolis. The views expressed are those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Minneapolis, the Board of Governors, or the Federal Reserve System.

The author welcomes your comments on this paper.

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