Biden’s Top Economist Reveals Key To Ending Housing Crisis
It’s no secret that Americans are unhappy with the state of the United States economy, as consumer sentiment heads even lower, even despite the remarkable recovery we have made since the pandemic; inflation has come down with unemployment remaining low.
The disconnect between the data and Americans’ views of the economy likely has a lot to do with persistent sticker shock, according to U.S. Council of Economic Advisers Chair Jared Bernstein.
“I think it all comes down to inflation,” Bernstein said during a policy briefing at the Economic Policy Institute in Washington. “I think it’s about prices. I think we’re trying to talk to people about disinflation, and what they really want is deflation. They want their old prices back, dammit.”
According to Microsoft Start, Price growth has slowed in recent months, but broad price levels themselves are unlikely to fall without a deep, massively destructive recession. If people knew how badly the economy would need to be doing to cause deflation, they might think otherwise, Bernstein added.
One cost that doesn’t look like it’s coming down anytime soon: housing. Rent and home prices are through the roof and housing affordability has reached record lows.
A severe housing shortage is the main culprit for steep housing costs. The US is short anywhere between an estimated 1.5 million and 5.5 million homes. High interest rates are scaring off both potential buyers and sellers and slowing rates of homebuilding. And high mortgage rates haven’t brought down home prices as much as they were expected to, creating an “interesting headwind” for the economy, Bernstein said.
Housing policy is largely in the hands of local and state government, but there are ways for the federal government to intervene and push for more homebuilding and lower housing costs, including subsidizing rents, homeownership, and development.
The government needs to step in, Bernstein said, because affordable housing is suffering from market failure.
