Program Evaluation and the Affordable Housing Crisis

Some time ago I saw a San Francisco politician on social media complaining that there is not enough affordable housing for his constituents. His proposed solution was for the government to subsidize the construction of affordable housing units. The assumption underlying this legislation is that high housing costs are a failure of the free market, and politicians must intervene on behalf of the common good. Many economists argue, however, that government interventions to create more affordable housing are trying to correct a problem that was created by government intervention in the first place. Housing costs rise when there are a lot of people bidding for a limited amount of housing. If the supply of housing increases to meet the demand, housing costs will go down. Various government interventions may be responsible for slowing the construction of new housing. The economist Thomas Sowell notes that prior to the 1970s, housing in the San Francisco area and California in general was rather affordable. Sowell states that “the decade of the 1970s marked the beginning of severe government restrictions on the building of houses and apartments. That same decade marked the meteoric rise of housing prices” (p. 28). Government interventions such as “open space laws...zoning laws, environmental laws, historic preservation laws, and others” were implemented with good intentions, but they had the effect of restricting the supply of housing and increasing rents (p. 29).

Program designers and evaluators are tempted to blame social problems on the unregulated market and assume that the solution is to be found in government spending. It is my opinion that program evaluators who are interested in understanding the root causes of a social problem should first consider whether government is the source of the problem, not the solution.

Reference

Thomas Sowell (2011). Economic Facts and Fallacies (2nd edition). Basic Books.