Every few months the affordable housing crisis will retake
news headlines to report even further evidence that many residents of urban
areas are struggling to afford a place to live[1].
One force behind this issue is stagnation in median wages[2].
While addressing wage growth is important, another approach is to focus on the
other force contributing to affordable housing shortages – the number of
housing units available.
This argument, based on simple principles of economics, is
hardly new. However, it has yet to be implemented in an effective way[3].
Some of the barriers to implementation are opposition to new housing, and
particularly affordable housing, units. This is driven both by the desire to maintain
the “character” of neighborhoods and the incentive of homeowners and landlords to
keep the value of their properties high. Many of these preferences are even
formally codified in zoning and housing codes.
Such codes are the precise types of regulations that prevent
innovation and growth. Creating Shared
Value persuasively argues that capitalism is capable of creating more value
for both the economy and society, but that a necessary condition for this to occur
is appropriate government regulation[4].
Loosening zoning and housing regulations would allow the housing development
industry to create greater economic value while also attending to the social
need for affordable housing.
The housing industry has a clear interest in decreasing
regulations and would likely agree that this step is necessary to improve the
affordable housing shortage. But the authors of Creating Shared Value also outline key strategies that housing
developers should embrace to maximize the social value created. These three
strategies for shared values are, “…reconceiving products and markets,
redefining productivity in the value chain, and building supportive industry
clusters at the company’s locations.”[5]
While it is not necessary to pursue all three strategies for
shared value, the opportunity of reduced housing regulations gives
opportunities for each strategy. First, developers can rethink housing types
for different neighborhoods, potentially with recycled shipping containers in more
urban neighborhoods and multi-unit buildings styled like single family homes in
more traditional neighborhoods. Second, a redefined supply chain could include
locally-sourced or sustainable physical materials or emphasize and reward the
role of labor. Finally, companies should support a local cluster of construction
training facilities, research and innovation in design and engineering, making construction
materials, and creating a more welcoming culture.
The strategies in Creating
Shared Value should guide the responses of both government and housing
developers to the affordable housing shortage. Through a combination of
deregulation and appropriate business strategies, the housing market can experience
the growth and innovation necessary to meet the social and economic needs of
millions of people.
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