Housing depends on wages and land, not regulations

By Laz Ayala

There has been a lot of discussion about the rising cost of housing, low vacancy rates and low inventory of homes for sale, especially at the entry level. This issue faces challenges from various fronts.

One of the main challenges is the low supply of buildable land, especially in Ashland, Talent and Jacksonville. The market forces of low supply and high demand are compounded by economic factors involving high inflation in construction labor, building materials and land costs.

Lumber, for instance, has nearly doubled in the past year. In addition, higher interest rates are having a direct impact on housing affordability. In 2013 rates were 3.5 percent for a 30-year mortgage compared with 4.5 percent today — and rising. Purchasing power has decreased 9 to 11 percent in the past five years simply due to a 1 percent increase in interest rates.

Having said this, we can’t ignore the correlation between stagnant wages and housing affordability. The housing affordability issue faced by working class families today has as much if not more to do with wage stagnation than with rising home prices. The median price of a home in Oregon in 1990 was $85,700 (U.S. Census), compared with $322,100 today (Zillow). This represents an average annual increase of 9.9 percent. Wages, on the other hand, have remained stagnant for the same period. To ignore this fact and to simply impose more regulations on the housing industry through rent controls and inclusionary zoning would be a mistake. What we could use is a greater supply of buildable land, not more regulations.

I grew up in a Third World country where I lived in extremely substandard housing conditions. I know firsthand what that is like. The housing issues I experienced growing up had nothing to do with the lack of housing regulations, or with greedy developers getting rich at the cost of the less fortunate. It had everything to do with poverty, meager wages and exploitation.

Perhaps we should look closer at the issue of wage stagnation as it relates to housing affordability before legislating housing regulations that will only discourage investment in the housing industry. Rent control and inclusionary zoning will only result in less and more expensive housing.

We need real solutions that address the crisis working families face today. The crisis is not just a rising cost of housing, but a rising cost of living in general. Unfortunately, the solution I keep hearing is to regulate rent prices and adopt inclusionary zoning rules requiring developers to build and subsidize housing for the poor. This is not only unreasonable but economically unfeasible. The results of such regulations will discourage development and investment, resulting in unintended consequences.

I support advocating for more housing that meets the needs of the community. I support advocating for more work-force housing. I support advocating for housing that meets the needs of families making 100 percent, 200 percent, 300 percent or more of the area’s median household income. I support advocating for subsidized housing that meets the needs of the poor, but that burden should not be placed on developers without a mechanism for public subsidies.

It is economically unfeasible for the private sector to build subsidized housing without public participation. To suggest otherwise is naive, or at best incoherent with economic realities.

Laz Ayala owns KDA Homes in Ashland.

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