Addressing Affordable Housing and Housing Insecurity – A Conversation at Columbia Business School
Tom Goldenberg '22, a member of the Student Leadership and Ethics Board (SLEB) at Columbia Business School, spoke with a panel of experts to glean insight into today’s affordable housing and housing insecurity predicament.
By Tom Goldenberg ’22
This spring, I moderated a panel on the topic of affordable housing and housing insecurity hosted by The Bernstein Center for Leadership and Ethics’ Student Leadership and Ethics Board at Columbia Business School. It was an impressive panel of public- and private-sector leaders, including renowned author Dr. Jill Khadduri (Homelessness in the Midst of Plenty), Columbia University Professor Brendan O’Flaherty (Making Room: The Economics of Homelessness), McKinsey Senior Partner Dr. Jonathan Woetzel (No Ordinary Disruption), and McKinsey Associate Partner Jennie Nevin. Here are some highlights from the conversation.
Why Is This an Important Issue?
Throughout the conversation, the panelists stressed the importance of both homelessness and broader housing insecurity. Dr. Khadduri’s book, Homelessness in the Midst of Plenty, explains that homelessness is the most extreme form of housing insecurity, and many more Americans are rent-burdened, paying more than 30-40% of their income on housing. This leads to frequent moving, involuntary doubling up, and ultimately, homelessness. Dr. Woetzel added that “housing is a right, a fundamental [prerequisite] to contribute to society,” and that this widespread housing insecurity contributes to negative social outcomes such as higher divorce rates, higher crime rates, and lower education rates.
Dr. Woetzel went on to say, “The unhoused population or people experiencing homelessness is just the tip of the iceberg. In Los Angeles we have 60,000 – 70,000 people on the street, another 20,000 – 30,000 in their cars, but easily 3 million paying more than 30-40% of their income on housing.”
“The unhoused population or people experiencing homelessness is just the tip of the iceberg"
The Key Drivers of Housing insecurity
One of the main drivers mentioned was the lack of social support in the U.S., particularly in housing. “In theory, if a household income is less than 50% of the area median income (AMI), they can get housing assistance. But in reality, only one in four receive it. The housing dimension of the social safety net is broken,” said Dr. Khadduri. Current U.S. housing assistance is structured as a block grant, not an entitlement, which means that not all who qualify for assistance can receive it.
From a macroeconomic lens, we discussed the impact of real estate investing on housing prices and the opportunity for innovation in construction. Dr. O’Flaherty also commented on the impact of COVID on rising housing prices: “We’ve seen an increase in demand for locations close to the center of the city by highly skilled, highly paid professionals. Other things also drive housing prices – houses need to have Wi-Fi now and better windows because the weather is worse, and the number of adults per household have been decreasing significantly since the 1970s. People are going to spend more time at home, which takes more space. This all creates a massive increase in the demand for housing.”
In some instances, however, COVID’s income support programs reduced family homelessness.
Another factor pushing up prices across the country is housing as an investment.
“One price does not clear two markets – there is a market for shelter and a market for investment. And when one person who wants a piece of land for investment is competing with a person who wants a piece of land for shelter, I can more or less guarantee you that the person who wants it for investment is going to win,” said Dr. Woetzel.
He goes on to explain that productivity of real estate construction has not kept up with other sectors of the economy, creating an opportunity for technology to play a role in making construction more efficient.
One potential solution to housing insecurity is expansion of the federal housing voucher program. Dr. Khadduri comments: “Currently those experiencing homelessness can easily live in a place of their own; all it takes is giving them the ability to afford it. A housing voucher pays the difference between 30% of household income, however low that income is, and a rent at about the middle of the market. Currently about 2 million households are using vouchers, but a couple hundred thousand more per year would do a lot to alleviate the problem.”
In terms of objections to housing vouchers and how they might impact the housing market, Dr. O’Flaherty shared what happened in the 1970s in South Bend, Indiana, and Green Bay, Wisconsin. The market was flooded with vouchers as part of a randomized control trial, but housing prices were not observed to change significantly.
In terms of regional solutions, several were proposed, including providing advantages to buyers who own as primary housing rather than investment, and incorporating a tax on land. California’s Regional Housing Needs Allocation Plan may also serve as a model for state intervention in unlocking local housing supply, and state enforcement of housing voucher discrimination is critical to ensure equal access to housing. Finally, it is important to politically mobilize people for whom affordable housing is critical, as such people may not be able to attend zoning board meetings or actively advocate for affordable housing.
The panelists closed with some practical advice to Columbia Business School students.
“This is a crucial issue of our time. Real estate is 20% of the economy, and 70% of the global balance sheet is in real estate. So, if you are interested in society, you are interested in housing and real estate. For the United States, this is the fight for our lives, quite literally. If we do not make homes for the people of the United States, there will not be a United States.” – Dr. Woetzel
“Watch things to change. While the production of housing hasn’t changed in the last several decades, the uses of housing have changed tremendously. This is a time of disruption in housing.” – Dr. O’Flaherty
“For those of who are not necessarily in housing, make this part of your world.” – Jennie Nevin