As worries about rising inflation grow more widespread, the most obvious remedy is rarely mentioned: provide more things for people to buy. And one of the most obvious “things” in short supply is affordable housing.
Inflation is the result of too much money chasing too few goods, so a common government response when inflation heats up is to rein in the money supply. Money, after all, is something over which government has the most direct control. But an alternative response is to increase the supply of goods. That’s harder, because the government’s influence on goods production is more indirect, but it almost certainly is the healthier response overall.
What brings this to mind is the appalling–and growing–shortage of affordable housing in the U.S. The National Association of Relators this month said the nation is short 6.8 million housing units, due to a 20-year-long slowdown in housing construction, and most of what’s being built is on the high end of the market. The steady decline in housing construction feeds into a vicious circle, in which fewer people–especially including retirees–can afford to move, so they stay put. Then, when changing business or economic trends require workers to relocate, the housing available to them is both over-priced and in short supply.
A leading example of this phenomenon, ironically, is Elkhart, Indiana, in and around which more than 80% of all U.S. RVs are manufactured. Last month, Elkhart was tagged by The Wall Street Journal and realtor.com as the nation’s “best emerging housing market,” which is investor-speak for “get in now because prices are about to go through the roof.” Indeed, with a median price for houses of just $232,250, the local housing market is starting from a relatively low base–while the booming RV construction industry means demand for additional workers, and therefore for additional housing, is high and going higher. Indeed, as one local reporter noted this month, “almost two-thirds of the buyers in the Elkhart area were not locals.”
While prices for Elkhart housing have started exploding, the economic engine behind much of that growth–the RV manufacturing industry–is likewise in high gear, on course to crank out a record-breaking 600,000 or so units this year alone. Those recreational vehicles, in turn, are being snatched up not just by that segment of the public that puts the emphasis on “recreational,” but by that segment of the public that can’t find, or can’t afford, conventional housing.
So, for example, Austin, Texas, is facing a housing squeeze in part because Tesla has moved its headquarters there and also is nearing completion of a “gigafactory” that will employ up to 10,000 low- and middle-skill workers. Paid an average of less than $50,000 a year in a city where the average home price is now $525,000, those workers also will be scrambling to find an affordable place to live–and the area’s trailer courts and RV parks are gearing up to accommodate at least some of them. One predictable outcome: the cost of staying in an RV park will be bumped up considerably.
Such housing price inflation is a nationwide phenomenon, not confined just to Elkhart or Austin, and is indicative not of too much money but of inadequate supply. Increasing the supply of middle-income housing would not only meet people’s basic need for shelter at a cost they can afford, but would relieve the pressure on recreational facilities that never were intended to be this century’s version of Hoovervilles.