Opinion: To Boost Economic Development, Build Housing

In a piece for the Philadelphia Citizen, Bruce Katz and Michael Saadine outline their ideas for “what forward-thinking localities can do to leverage housing as an economic development tool.” 

The authors argue that although current market conditions should encourage developers to build new housing, “the litany of constraints on new construction across the country have made it ‘too hard’ to build new housing and ‘too easy’ to generate returns through lower-touch investments in housing.” This means investors are more likely to buy existing, fully occupied buildings rather than build new units.

“The concept of a starter home is disappearing. Our inability to build sufficient housing has made investors the most competitive buyers for much of the nation’s most affordable housing. We see yet another example of capital begetting capital in our system, with a lack of entry points for those who aspire to grow wealth from a lower baseline,” the authors write. Meanwhile, rental housing is becoming more expensive as owners profit from renovating older units and raising rents.

The article points to one example of a city that leveraged remote work to its advantage. “Tulsa, Oklahoma has a median home price that is 40 percent below that of the country overall. Though no one could have predicted the remote work wave brought on by Covid, Tulsa was forward-thinking on remote work at a time when most of us could not have imagined downtowns shuttered due to a pandemic.” In 2018, the city launched a remote work support program that drew over 1,200 new workers to the city. “While the program was not centered around housing, it paired an affordable market with an additional nudge to get ahead of what could be a massive economic wave for cities that were previously left behind.”

The article concludes, “Across the country, many metros that previously dedicated economic development resources to trying to lure employers with tax incentives would do well to think about their end consumer – residents – and how to create or maintain a housing market with enough supply to be affordable.”