–Hey Taylor – What steps can be taken to address the escalating costs of renting and owning a home? It feels like the situation is out of control, and I’m not finding the solutions being suggested to be satisfactory. Is there a way to effectively tackle this issue?

 

–Hey Robert – There’s always an ebb and flow to these issues, though that natural progression can sometimes involve a lot of turmoil. I was looking at the Bipartisan Policy Center’s proposals for lowering rent, and it seems there’s potential for progress in a few areas.

 

  1. Regulations. Our government has way too many regulations on most things, and housing is one of the most regulated industries by a long shot. It’s understandable in some ways—you don’t want to buy a house or move into an apartment building that immediately collapses because there are no building codes. Still, a lot of the rules were made in times of very different economics and are no longer serving a useful purpose. In cities especially, where rent is out of control, regulations about how many parking spaces and the percentage of land that can be used for apartment buildings make it really difficult to build affordable housing. Building permits take too long to get approved and that also drives up costs. Changing regulations could provide a little bit of relief fairly quickly, the gears of government need to be sped up.
  2. Community land trusts. There are non-profit organizations around the country that purchase land and then do their best to preserve prices even as the real estate market heats up. Some big cities also have affordable housing trusts to help pay for the development of multi-unit buildings. These trusts can be supported by local municipalities and encouraged by other officials. They might not solve the problem of government overreach, but the funds at least help home buyers and renters instead of just putting more hurdles in the way.
  3. Insurance. This is one of the biggest issues and one of the hardest, in my opinion, to solve. Some states have seen insurance premiums jump to outrageous levels, to the point where the cost of the house isn’t actually what makes the property unaffordable. In Florida, a few homeowners have just stopped paying for insurance, which could lead to a different kind of economic crisis if a storm takes those properties out. It seems like the solution is creating resiliency plans for the houses in the most vulnerable areas, and then having insurance companies code more appropriately so that some house 40 miles inland isn’t paying the same storm-surge insurance as a mansion right on the water. Unfortunately, that’s not easy work and it’s often controversial.

 

There isn’t a quick fix. However, some rules can be changed, and at least some work can be done. If you get a chance, go to a city council meeting and ask what’s being done to help—it’s always good to make our voices heard. Thanks for the question!

 

TAYLOR J KOVAR

CHIEF EXECUTIVE OFFICER

CERTIFIED FINANCIAL PLANNER™