Tighter regulations mean higher housing costs, says Atlanta Fed president

Speaking at Tulane University in New Orleans, he began his remarks by saying, “Housing is so fundamental to family well-being and security that one could argue that it goes beyond economics,” he identified that good housing contributes to raised outcomes in other areas, resembling education and employment.

He added that racial disparities in the flexibility to benefit from housing equity are also critical to any policy that promotes economic mobility and resilience.

“Unfortunately, housing – both as a place to stay and as an investment – ​​today is not working as well as it could for too many of our neighbors,” Bostic said. based on his prepared speech. “In the generally thriving metropolitan areas of the Sun Belt, in major coastal and Midwestern cities, and even in smaller towns and rural communities, housing is unaffordable for far too many.”

He identified that the national median household income is about $75,000 a 12 months and Americans have to spend 41% of that quantity to own a median-priced home, which costs about $359,000. This is well above the usual 30% affordability threshold.

And in some communities the proportion is even higher. For example, Bostic said that within the Miami-Fort Lauderdale-West Palm Beach region, the median-priced home consumes 54% of household income. Tenants also face similar burdens, he added.

“I mostly talked about metropolitan areas,” he said. “But rest assured that affordability is also an issue in rural areas. In rural areas the issue takes on a different aspect. Average incomes are lower and in many cases housing quality and even access to infrastructure such as sewage are pressing concerns.”

Despite the grim statistics, Bostic expressed some optimism when discussing housing policy experiments, pointing to efforts to loosen zoning rules in Florida and Minnesota. Other hopeful signs include the promotion of prefabricated housing to extend supply, while market forces also boost production, he said.

Still, Bostic highlighted data showing that overall land use regulations have turn out to be stricter. And that may very well be a reference to the housing crisis.

“A brief investigation by researchers at the Atlanta Fed found a close connection between restrictive land use regulation at the county and metropolitan level and housing unaffordability, based on our bank’s affordability monitor,” he noted. “Perhaps it is not surprising that the stricter the regulatory environment, the more expensive the real estate market appears to be on the whole.”

Of course, the affordability crisis is a “frustrating, incredibly complex puzzle” that has no easy solutions, Bostic said, acknowledging that it raised more questions than answers.

His comments come at a time when earlier hopes that lower mortgage rates would improve affordability have been dampened. Signs of stubborn inflation have pushed back the timeline for a possible rate cut by the Federal Reserve. That has caused Treasury yields and mortgage rates to rise again in recent months after plunging last fall.

Now, homeowners who benefited from low rates of interest in the course of the height of the pandemic are reluctant to purchase a brand new home and finance at higher rates of interest, making a “lock-in effect” that limits the availability of homes available on the market has.

Meanwhile, the salary Americans have to buy an entry-level home has nearly doubled because the pandemic. accordingly According to Redfin data, the down payment on the common home has increased 25% within the last 12 months alone Redfin report said.

To sustain with higher housing costs, homeowners are making more sacrifices, resembling skipping meals and selling their belongings.

“Housing has turn out to be so financially burdensome in America that some families can now not afford other essentials like food and medical care and are forced to make major sacrifices, work long hours and beg others for money to pay their monthly bills Redfin’s economic research director Chen Zhao said.