FORTUNE -- The rent is still too damn high.
That's the only conclusion you can reasonably draw from reading Out of Reach, the latest report from the National Low Income Housing Coalition (NLIHC). The study attempts to determine the hourly wage a full-time worker would need to earn to afford "a decent two-bedroom rental home ... while spending no more than 30% of income on housing costs." The report concludes:
In the United States, the 2014 two-bedroom Housing Wage is $18.92. This national average is more than two-and-a-half times the federal minimum wage, and 52% higher than it was in 2000. In no state can a full-time minimum wage worker afford a one-bedroom or a two-bedroom rental unit at Fair Market Rent.
The report also outlines the fact that a growing share of the American population is looking to rent a home rather than buy, as the rate of Americans looking to rent increased twice as quickly last year as it had averaged over the past two decades. The fact that it's tough out there for renters has been well-documented -- the recession has obliterated many Americans' credit scores, forcing erstwhile homeowners into the rental market, raising demand and prices for rental units. The market is responding, however:
As you can see, multifamily housing starts (buildings with five or more units), the sorts of buildings that are often offered as rental units, have nearly recovered to their pre-recession levels. Meanwhile, single-family construction has remained far below pre-crisis norms. Of course, it may take years for this sort of construction to lead to an increase in affordable rental housing, as builders tend to focus on the higher end of the market, while affordable rental units tend to be from among the older portion of housing stock.
The time lag between supply responding to demand accounts for the central problem with housing policy in the United States. The effects of all of the policies that governments have tried -- from using public funds to build housing projects, to rent control, to subsidizing rent -- are felt years and even decades after the policies are instituted, making it difficult for the public to understand how housing policy affects their lives.
Take rent control, a policy the NLIHC has elsewhere endorsed. This policy reduces the incentive for building new homes, which will further restrict supply, leading to higher prices and ever greater need for rent control. Proponents of rent control have argued that the policy isn't just meant to make apartments affordable, but to make the lives of low-income people more stable and neighborhoods more diverse. While these may be laudable goals, rent control is obviously not a solution to the need for more affordable housing.
The NLIHC also proposes an increase to the minimum wage. Again, it's difficult to see how this will lead to more affordable housing. Notwithstanding the fact that raising the minimum wage in any significant way would likely reduce employment, it would also put upward pressure on the cheapest rental properties, as all the people competing for those homes would see an increase in disposable income.
The most reliable way to reduce the price of housing is to build more housing. We can encourage this by easing zoning restrictions and promoting more density in economically productive places like New York City and San Francisco, a policy that has been argued for eloquently by writers like Matt Yglesias and Ryan Avent.
But that doesn't mean government has to get out of the housing market. Local governments can take part in building and restoring public housing, as well as constructing more robust public transportation systems, as long as it's done in a manner that encourages dense living.
Part of the problem stems from piecemeal fashion in which government agencies try to address the difficulties of America's poor. The NLIHC's report argues that it's extremely difficult for the working poor to find housing that costs less than 30% of their income. But where does this 30% figure come from? It's actually an arbitrary figure that dates back to when the federal government first became involved in providing housing assistance, based on the idea that it was "the amount of income that a family could spend and still have enough left over for other nondiscretionary spending," according to the Census Bureau.
But what if the government put together effective programs for providing needy people with food, medical care, and education? Certainly that would make it a lot easier for the working poor to put much more of their income into housing. And if providing housing assistance is more difficult to do because of local politics, corruption, or other side effects, then it may make sense to spend more effort providing other services while leaving the provision of housing mostly to the free market.
Economists from the Demand Institute predict only modest home price increases nationally, but some areas will fare much better than others.
FORTUNE -- "The time to buy is when there's blood in the streets." That quote, attributed to 18th-century financier Baron Rothschild, means that buying when everyone else is panicking is a great idea, as that's when prices are at their lowest.
But when it comes to the real estate market, the MOREChristopher Matthews - Feb 27, 2014 9:43 AM ET
That is, if you can afford a down payment and qualify for financing.
FORTUNE -- Home prices have been rising steadily for more than year, with the most recent Case-Shiller index reading showing the biggest year-over-year increase in nearly a decade. But that doesn't mean that it is a bad time to buy.
According to a just-published analysis from Trulia Chief Economist Jed Kolko, homeownership is 38% cheaper than renting nationally and MOREChristopher Matthews - Feb 26, 2014 12:18 PM ET
But other data suggest that the real estate market is finally cooling off.Christopher Matthews - Feb 25, 2014 10:58 AM ET
Recent data suggest that the promised construction boom may not materialize.Christopher Matthews - Feb 19, 2014 12:39 PM ET
Unlike home prices and foreclosures, the pace of home construction is far from back to normal. And a lot of it comes down to unemployment among potential first-time homeowners.Nin-Hai Tseng, Writer - Dec 18, 2013 2:48 PM ET
It's working for some, but don't bet the house on it.
FORTUNE -- In the years following the financial crisis, the most unlikely homeowners have emerged: Hedge funds and private equity investors have been buying up properties at bargain prices and turning them into rentals until they become ripe for a profitable sale. This phenomenon has been widely reported, but less attention has been paid to individual investors who are doubling MORENin-Hai Tseng, Writer - Nov 7, 2013 2:46 PM ET
After rising for more than a year, they still offer value.Scott Cendrowski, writer - Sep 16, 2013 10:23 AM ET
Are first time homebuyers back or aren't they? The Federal Reserve wants us to believe they are.
FORTUNE -- Throughout recovery of the U.S. housing market, a lot of attention has been paid to young homebuyers. Countless surveys and studies suggest the share of first-time homebuyers in their 20s and 30s has dropped off considerably, that they've been missing out as the housing market heals.
The media, including Fortune, has widely reported the MORENin-Hai Tseng, Writer - Sep 4, 2013 11:11 AM ET
The President's "across-the-aisle" plan to give housing relief to the middle class needs to give credit where credit is due.
FORTUNE -- Washington is very good at creating things out of thin air. The Federal Reserve has created trillions of dollars that it has used to buy securities in an attempt to hold down interest rates. Congressional Republicans have created numerous reasons why having the federal government default on its debt is MOREAllan Sloan, senior editor-at-large - Aug 14, 2013 5:00 AM ET
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