From erasing all student loan debt to promising the cure for cancer, the Democratic Primary race has already produced many laughable and problematic policy proposals. The latest idea to make economics majors shiver is Cory Booker’s plan to combat the affordability crisis in housing. Essentially a tax credit, the new subsidy would cover the cost of housing above 30 percent of a person's income.
If it sounds too good to be true, it's because it is. The Wall Street Journal raises some important questions, “Want an extra parking spot, more storage, an on-site gym? Sure, if it’s rolled into the lease and then billed to the taxpayer. Some people would probably upgrade neighborhoods. Why live 15 subway stops from work if rent is capped at 30% of income?”
Young people, especially in large liberal cities, are finding it increasingly hard to find affordable housing. However, I encourage my fellow millennials to look past these latest promises and imagine the actual cost of this proposal.
Finding affordable housing options for those struggling in our own communities is a worthwhile effort but the problem is the way Booker suggests we get this done. Putting a cap on the amount tenants can pay will increase the price of housing overall because the government (aka taxpayers) will fund the increasing demand. Government subsidies would create a distorted housing market where consumers could spend well outside of their means without backlash.
One additional concern, rightly pointed out by the WSJ, is that a cap on the percent renters can spend per paycheck reduces the incentive to work. For example, if a luxury apartment is $3,000 a month and a worker is earning low-income level pay, they would get to pay less of that $3,000 rent compared to a worker who got a raise to earns a more modest income. This completely eliminates the idea that you have to work hard to be able to afford something nice.
To be fair, Booker’s proposal does include helpful provisions for tenants to fight discriminatory practices when finding housing or trying to keep their current housing. There is no denying that affordable housing is a problem for many, but billing taxpayers for rent will do the entire community more harm than good.
Housing crises have been cited on both sides of the country, usually in extremely liberal cities like San Francisco and New York City. In both cases the government stepped in to try to control the free market and the taxpayers were left to pay the price. On a national level, federally subsidized housing benefits for everyone would surely produce the same failures.