Odd Lots Is There an Extremely Simple Fix for Affordable Housing?
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Mar 13, 2025 Kevin Erdmann, a senior affiliated scholar at the Mercatus Center, dives into the critical issue of housing affordability. He argues that overly strict lending standards post-Great Financial Crisis have wiped out the starter home market, making homeownership increasingly elusive for lower-income individuals. Erdmann suggests that loosening these standards could revitalize homebuilding, catering to those with lower FICO scores. The conversation explores the complexities of zoning laws, rising housing costs, and the potential for simple solutions to a pressing crisis.
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Housing Shortages and Migration
- Coastal metros have restricted housing construction, forcing people to move to other cities during economic booms.
- These migrations caused temporary price increases in destination cities, misconstrued as bubbles driven by lending and speculation.
Fundamentals vs. Speculation
- The narrative post-financial crisis focused on speculative bubbles and excessive household speculation in the housing market.
- However, the fundamental demand for shelter drove population growth and subsequent demand, not speculation.
Tightened Lending Standards
- Post-financial crisis, lending standards tightened significantly, impacting access to mortgages.
- Average credit scores for approved mortgages increased, effectively excluding a substantial portion of potential homebuyers.