Depending on where you live, the U.S. housing market is looking up. Regions with strong local economies are improving. But most markets are still weak. And a growing number of Americans cannot afford to live where they work. Millions of low-and middle-income families struggle to pay increasing rents with stagnating wages. And an estimated one in six homeowners are still underwater on their mortgages. Advocates are pushing for innovative solutions to what they call an affordable housing crisis. But many are concerned about the fairness of some outcomes. Diane and her guests discuss the challenges of finding affordable housing in the U.S.


  • Julia Gordon Director of housing finance and policy at the Center for American Progress.
  • Dante Chinni Columnist, The Wall Street Journal, and director, American Communities Project at American University.
  • Mark Calabria Director of financial regulation studies, the Cato Institute.


  • 10:06:53

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. It's harder than ever for many low and middle income Americans to afford to live where they work. Joining me to talk about the role of government, developers and banks in what many call an affordable housing crisis, Dante Chinni of The Wall Street Journal and American University, Julia Gordon of the Center For American Progress and Mark Calabria of the Cato Institute.

  • 10:07:27

    MS. DIANE REHMYou're invited, as always, to be part of the program. Give us a call at 800-433-8850. Send us an email to Follow us on Facebook or send us a tweet. And welcome to all of you.

  • 10:07:49

    MR. DANTE CHINNIIt's a pleasure to be here.

  • 10:07:50

    MR. MARK CALABRIAThanks for having me.

  • 10:07:51

    MS. JULIA GORDONThanks so much for having me.

  • 10:07:52

    REHMJulia Gordon, I'll start with you. Give us a sense of the overall state of the housing picture in the U.S.

  • 10:08:03

    GORDONWell, let me start by talking from the family point of view. Right now, the median asking rent for a vacant apartment has about double in the past two decades. More than half of all renters are now paying more than 30 percent of their gross income for rent, which is what's considered the affordability standard. More than a quarter are paying more than 50 percent of their income to rent.

  • 10:08:39


  • 10:08:40

    GORDONAt the same time, we've turned back the clock almost two decades on home ownership rates, as well as new mortgage originations. So from the family point of view, the situation for housing is not good. And as you know, without affordable housing, people cannot join or stay in the middle class and without affordable home ownership, we lose a big tool toward reducing inequality.

  • 10:09:12

    REHMSo what do you mean when you say we've turned back the clock a decade or two?

  • 10:09:20

    GORDONWell, home ownership rates now in the aggregate look like they looked in the mid-90s. For people of color, home ownership rates remain stuck below 50 percent and the situation for millennials, for first-time home buyers is as grim as it's been in quite some time.

  • 10:09:46

    REHMAnd Mark Calabria, how does the government define affordable housing?

  • 10:09:53

    CALABRIASo affordable is usually some metric of how much of your income you spend on housing. 30 percent is often a common used standard. Some of the assisted rental programs might use 25 percent. Often in some of the policy discussion, affordable is sometimes synonymous with assisted. Of course, I think the broader question really gets back to the burden, cost burden, how much are you spending on housing.

  • 10:10:14

    CALABRIAIt's also important to keep in mind that the government measures kind of include everybody. So if for some bizarre reason you're a millionaire and you're spending 50 percent of your income on housing, you must have a really nice house, but you're also considered cost burden. So I do think it's important that when you're looking at the numbers, you have to dig into, you know, what are the income profiles you're talking about and, of course, I'd be very clear, vast majority of cost burden households are low income households.

  • 10:10:37

    CALABRIASo it certainly is, you know, we do have some middle class, upper middle class homeowners and renters that are cost burdened, but those numbers are relatively small to the overwhelming number of low income renters.

  • 10:10:48

    REHMSo what you're saying is that the low income renters, when they're paying 30 percent of their income for rent, that is a really big chunk of their income.

  • 10:11:02

    CALABRIAIt's even at the smaller end. If you look at households that are making, say, under $20,000, the average household under 20,000 is paying about 40 percent of their income in housing costs. And so this includes both homeowners and renters and so...

  • 10:11:18

    REHMWell, wait a minute. Is that because they're making so little or is that because rentals have gone up so much?

  • 10:11:26

    CALABRIAIt's both. So it's absolutely for some households, it's predominantly an income. For some households, it is a lack of housing supply. So again, it depends on the local market you're talking about and, you know, in some market, you know, we're not seeing these 40, 30, 50 percent burdens and in other markets, we are. So it is a low (word?)

  • 10:11:44

    GORDONAnd the low end of affordable housing is where we're losing the most supply.

  • 10:11:48

    REHMI see.

  • 10:11:48

    GORDONYou know, where the housing stock is aging, where there are fewer financing options for new production.

  • 10:11:54

    REHMDante Chinni, where is the most affordable housing in the country today?

  • 10:12:01

    CHINNIWell, if you want affordable housing, go rural, right? It's cheaper. If you want to live in a rural place, the American Communities Project, which I run it at AU, we break the country into 15 different types of counties. So I just ran some numbers looking at big cities, places we all urban suburbs, X-urbs and then rural middle America, which is this massive category of, like, 600 counties that it's rural, kind of slightly above average income, slightly above average education, but pretty much static.

  • 10:12:27

    CHINNISo this is what the numbers look like. In the big cities, 42 percent of people -- 42 percent of households are paying more than 35 percent.

  • 10:12:34

    REHMMore than 35.

  • 10:12:35

    CHINNIMore than 35 percent. In the urban suburbs, it's 42 percent. In the X-urbs, it's 36 percent and then when you get out to rural middle America, it's 32 percent. The numbers get really interesting, though, I looked at -- if you look at households where the income is under $35,000, okay, so if you're under $35,000 and you live in the big cities, 63 percent of those households are paying more than 35 percent.

  • 10:13:00

    CHINNIIn the urban suburbs, 65 percent, in the X-urbs, 56 percent are paying more than 35 percent of their income. But when you get out to rural middle America, it's 29 percent, a huge drop-off. So it's a question of, you know, if you want affordable housing, move to rural middle America. There's a problem, however, what are you going to do when you get there?

  • 10:13:21

    REHMNo jobs, yeah, exactly.

  • 10:13:23

    CHINNIAnd that's the challenge.

  • 10:13:24

    REHMWhat are the least affordable areas of the country?

  • 10:13:30

    CHINNIWell, we live in one of them, right, or around one of them. The big cities are, in terms of when I -- the big cities, the way we rate them down is like 46 of the largest counties, most densely populated counties holding the biggest cities in America. Again, 42 percent of the people who live in those places are paying -- of all income groups are paying more than 35 percent of their income.

  • 10:13:50

    CHINNIAlso, if you take the average median home price in those places, in the big cities, the average median home price is about $266,000. In the urban suburbs, it's about $304,000. And you get to the X-urbs, about $204,000. So if you want a little -- if you want to move a little further out, if you work in a metro area, you can get more bang for your buck, right? Rural middle America, though, again, if you go out to rural America, the average median home price is $113,000.

  • 10:14:19

    CHINNISo you can still, you know, you can still afford a home in rural middle America. We have this problem when I look at data over and over again of where it's cheap to live and where we don't have -- we already have too many people out there because there aren't any jobs out there. You can afford to live there...

  • 10:14:39

    GORDONAnd there's no transportation.

  • 10:14:39

    CHINNIAnd there's no transportation to get out there.

  • 10:14:41

    REHMSo you've got this big gap.

  • 10:14:44

    CALABRIAYou know, let me echo -- I mean, absolutely there's an urban/rural divide, but there's also, you know, sort of coastal, you know, inner America divide. You do have big cities like Phoenix, like Houston. I mean, I consider those big cities.

  • 10:14:57

    CHINNIOh, huge, yes.

  • 10:14:57

    CALABRIAAnd so, you know, Phoenix is a great example. Same size as San Diego, but house prices are half the price that they are in San Diego and despite the fact that people actually are moving to Phoenix and Houston. So you certainly have some...

  • 10:15:10

    REHMBut aren't those mostly retired people moving, for example, to Phoenix?

  • 10:15:13

    CALABRIAIt's both, it's both. So there's a lot of -- but there's a lot of job creation in Phoenix. There's a lot of job creation in Houston and so certainly, you're continuing to see this migration of people from cold parts of America to warmer parts of America. I think that's gonna continue. Obviously, there's been some reverse migration as people get into their 80s. But the point being is that the urban/rural is an important indicator, but there's also big differences within urban areas.

  • 10:15:38

    CHINNIThat's true, yeah.

  • 10:15:39

    REHMOkay. So -- but the problem being that in the areas where homeownership may cost less, there's a huge job gap and there are no jobs.

  • 10:15:57

    GORDONCorrect. There are no jobs. And even for people who could afford a home, right now, access to mortgage credit is extremely tight and many families whose credit scores may have been hurt during the recession, maybe they had a period of unemployment, they're finding it very hard to put together the financing they need to buy even an affordable house and at the same time, they're competing with a lot of investment money out there where cash buyers will come into a place like Phoenix and they will buy the homes and a cash buyer is almost always gonna beat out an aspiring homeowner who needs to get financing.

  • 10:16:41

    CHINNIOne thing I would say is really interesting, I think, an we're talking about Phoenix and Houston in particular, they're interesting places because they have won -- well, first of all, they're not on the coast, true, but they sprawl like crazy, right? They just sprawl and sprawl and sprawl. And Phoenix, in particular, I have spent some time out there doing reporting, was just hammered in the housing crisis. I mean, streets that just end. Houses that were built and then, all of a sudden, there's no more houses.

  • 10:17:04

    CHINNIThere's pavement, but there weren't houses. Now, some of that's changed, but it's a place that really got pounded so there -- some of those places are being bought up now and -- but it is the question of the places who lost -- the people who lost the houses in the first place being able to get another house is a whole other problem.

  • 10:17:20

    REHMYou know, we've got some Facebook feedback. Sylvia writes, "in the very near future, only the rich will be able to afford their own home. Actually, that's already happening." Do you agree with that?

  • 10:17:38

    GORDONIn these more expensive cities, that is certainly the case. It may not be the case everywhere, but the reason I think this is such a crisis is homeownership really has been the driver for building family assets in this country. You know, economists will tell you that homeownership is not necessarily the best way to build assets. There are, theoretically, other ways you can do it. But the fact is, that's the only way that's really worked in this country and that is especially true for families of color.

  • 10:18:11

    GORDONAnd so we have to grapple with what it means if we're locking large swaths of the public out of homeownership. That has a much larger macro economic impact.

  • 10:18:23

    REHMJulia Gordon of the Center for American Progress. Short break here and when we come back, we'll talk more, take your calls, your email. Stay with us.

  • 10:20:01

    REHMAnd welcome back. We're talking in this hour about homeownership. Of course there is affordable homeownership in various parts of the country. Sadly, however, according to our guests this morning, the availability of home ownership does not necessarily mesh with the availability of jobs. And just before the break, Julia Gordon of the Center for American Progress, you were saying that homeownership has been the way for people, most especially minorities to establish financial stability. You, however, Mark Calabria, take some issue with that.

  • 10:20:56

    CALABRIASo I want to make a point. And Julia used the phrase that rolled homeownership back a decade, which it was true, the homeownership rates are back to where they were about a decade ago. But where they were a decade ago is where they've been since about the 1960s.

  • 10:21:08

    REHMHow about two decades ago?

  • 10:21:09

    GORDONTwo decades.

  • 10:21:11

    CALABRIAAnd so the question is now, I'm skeptical that the increase in homeownership we saw in the 2000s was a sustainable trend, that to me it was a boom in homeownership that was driven by loose credit that drove up house prices. And it gets to be a great tension here which is, to me, cheap credit is not -- or the availability of credit is not the single biggest issue for homeownership. The single biggest issue for homeownership is house prices.

  • 10:21:36

    CALABRIAAnd so there is this fundamental tension in housing policy that we want housing to be a great investment but we also want it to be affordable. Well, those two things are in direct conflict. The only way something is a great investment is if it's in short supply. And so I would rather have a strive toward policies where house prices actually continue in real terms to go down so that people can continue to afford to buy them.

  • 10:21:58

    CALABRIASo I do think we need to make a decision on whether is housing consumption, is it a roof over your head or is it a great investment? Because I think those things are fundamentally a tension.

  • 10:22:07


  • 10:22:07

    GORDONWell, I just want to pick that apart a little bit because when you talk about housing as a great investment, I think one of the biggest mistakes that happened during the housing bubble was people thinking of their house as something that would appreciate quickly and where they would see gains based on home appreciation. What I'm talking about is the opportunity to build equity.

  • 10:22:29

    GORDONWhen you pay rent, you never see those dollars ever again. When you pay the mortgage, you are in fact participating in what some people will call a forced savings program.

  • 10:22:40

    CALABRIAI was going to say, a forced savings program.

  • 10:22:41

    REHMBut -- yeah, but the other aspect of what happened in those two decades was the borrowing on that equity, which certainly diminished the value when people came to sell, Dante.

  • 10:22:58

    CHINNII do think that, again, you have to look at these -- these places are just very different. And I know this is what I do but when you look at these -- if you buy a house in rural middle America, you're not looking to flip it. You're there.

  • 10:23:08


  • 10:23:09

    CHINNIThat's your life.

  • 10:23:09


  • 10:23:09

    CHINNIAnd you've probably got a 30-year mortgage and you're going to pay it off. You know, you're going to be there for 30 years, you think, or you hope. You know, these other places -- what happened, I think, particularly in the early -- you know, in the last decade is you move -- what happened? Well, the population's urbanizing so we're increasingly flowing into these big city areas. And we've seen this again here. We -- they flow in. Instead of paying rent, which if you're -- say you're 29, you got a decent job and you don't want to pay rent anymore because you're just throwing money down -- throwing money into the trashcan. You want to buy a house.

  • 10:23:41

    CHINNISo we got to this thing where, you know what? Credit's cheap. I'm going to buy a house and then I'm going to have something and I'll sell it. I'm probably not going to live here for the long term. I'll sell it in a couple of years, I'll make some money and then I'll go buy something else. And I think we got into our heads that that was the way the system was supposed to work.

  • 10:23:56

    CHINNIAnd the only place we thought that, I think really, we tend to view this because we -- we meaning the people in this room and people who live in big cities around the country think that that's just the way everybody works. It wasn't. But it was what happened in these places and it dictated what happened in the larger housing market, and it's a problem.

  • 10:24:13

    REHMBut you know what you left out of that equation? What happened to the people who were living in those cities who were then bumped out because of gentrification and the like?

  • 10:24:28


  • 10:24:28

    REHMI've got two comments here. One from Alan who says, "The whole rich squeezing out the middle and lower class thing, they're squeezing people into the suburbs so they don't have to deal with that minor high gas price annoyance." And here's an email, "Rural housing is not cheaper. You have to factor in the gasoline cost of commuting, the necessity of travel for basic necessities like groceries, time spent doing those activities."

  • 10:25:13

    GORDONThat's absolutely true. And I think that, you know, that's figured into a lot of what we're saying here. I was speaking to a colleague the other day whose parents live in Toledo, you know, which is a more affordable environment. And he was talking about how his parents don't have that much income as they go into retirement. But they've paid off their house. And when they need to move to a long-term care facility or otherwise handle their retirement, that asset is going to be what makes the difference...

  • 10:25:47

    REHMOf course.

  • 10:25:48

    CALABRIAAnd cash out.

  • 10:25:48

    GORDON...between them making it and not making it. And that's why I think homeownership is very important from the equity building and sort of retirement and long-term security point of view. And while you might be able to do that with certain other kinds of financial investments, it's unlikely. It requires a fairly sophisticated consumer. It's very difficult and it doesn't have some of the advantages that are built into things like the tax code that homeownership has.

  • 10:26:20

    GORDONWhether or not you think there should be an advantage in the tax code for homeownership, which is a different conversation.

  • 10:26:26

    REHMAnother issue. Yeah, yeah, Mark.

  • 10:26:29

    CALABRIAWell, first let me make the point about the squeeze, the rich squeezing the middle class out. You know, you're only going to get squeezed out if there's a limited supply. So again, I don't want to sort of, you know, always go to Houston or Phoenix, but in areas where they can build and increase the density downtown, the middle class don't get squeezed out. In New York, San Francisco where you do get squeezed out, it is a supply issue.

  • 10:26:50

    REHMLook here in Washington at what's happened.

  • 10:26:52

    CALABRIAAbsolutely. The fact is, it's northwest D.C. There are places you could build in northeast. There are places you could even build in northwest.

  • 10:26:59


  • 10:27:00

    CALABRIABut the process just makes it so difficult to bring supply online. So to me, you don't have to squeeze people out if we can increase supply at the same time. But I want to add and make it a point about the long-term goals. So Bob Shiller at Yale who recently got a Nobel, you know, very smart guy, does a lot on housing markets, has put together this hundred year plus house price series. And so what he found interestingly enough was from 1890 to 1990, you had lots of variability, but basically in after-inflation terms, house prices on average were flat for 100 years.

  • 10:27:33

    CALABRIASo my point would be, there's not a lot of evidence that proves that housing is always going to be a great investment. I'm a homeowner. I'm pro being homeowner but we should not get people thinking it's going to be a get-rich-quick scheme.

  • 10:27:46

    CHINNIIt's not, no.

  • 10:27:46

    GORDONAt the same time it's not supposed to be a get-rich-quick scheme.

  • 10:27:50


  • 10:27:50

    GORDONIf you have your 30-year mortgage and you pay off your 30-year mortgage, you have a place to live. If you look right now across the expenses that people are facing in retirement, across the whole population, which includes some people who own a home outright and some don't, housing costs are about 50 percent of your expenses and retirement.

  • 10:28:12

    CHINNIAnd I do think it's an excellent point about density but, you know, Phoenix -- I do think in some ways Phoenix and Houston are the outliers in this case. And I think when you're talking about people moving and what's happened as populations urbanize, is they want density, right. So you actually have to build density in the places that sprawl.

  • 10:28:29

    CHINNIWhat you really have in Houston and Phoenix is they're essentially cities that have absorbed their suburbs, right. It's just a giant -- it's a city that has absorbed the suburbs around tons and tons of sprawl. You know, what's happening though, in terms of the people being pushed out -- because excellent point about gentrification -- it's -- what's happening is the suburbs have become the cities, right. There's all this talk about the end of the suburbs.

  • 10:28:50


  • 10:28:51

    CHINNIMy answer to that is always, it's not the end of the suburbs. It's the fact that the cities have grown so large that they have consumed the suburbs around them. So what you're -- increasingly having these suburban areas is pockets of wealth and pockets of poverty close to each other, which raises all sorts of questions about how do you transport people from one place to another, again, as cities fill up and populations spread out and -- because that's where the affordable housing is in the suburbs. It just raises questions about how do you move people around.

  • 10:29:17

    REHMHere's a tweet. "I'm married. I make under $20,000 a year. If I buy a home, Detroit looks like the only place I could afford. Do you believe this city will rise up?" Dante.

  • 10:29:39

    CHINNIIt's not fair. You ask that because I'm the Detroit guy. I grew up outside Detroit and I still have a lot of friends there. What is going to happen, in my opinion -- look, everybody's got theories about Detroit. My theory -- my personal theory about Detroit is this. They will manage to bring back the core of the city, the downtown city, which if you know the city as well, on Woodward Avenue and...

  • 10:29:56

    REHMIt still looks good.

  • 10:29:57

    CHINNIIt does and it's -- actually there's no -- you can't rent there right now.

  • 10:30:00


  • 10:30:01

    CHINNIThat's -- and talk about density. So where the people want to live in Detroit, you can't rent because it's a small area. So they've got to build density around it. But Detroit's a massive city and it's sprawled. It was one of these cities that sprawled all over. So bringing it back in mass, the entire city, it's a really hard...

  • 10:30:18

    REHMWhat about affordable housing there?

  • 10:30:20

    CALABRIAFirst I'll start with what -- I always find the most interesting observations, which is you can fit all of Boston into the vacant spaces of Detroit.

  • 10:30:29


  • 10:30:29

    CALABRIASo it really is just a massive amount. And it's also important to keep in mind, it's not the -- because housing is dirt cheap. You actually will pay more in property taxes on the typical house than you'll pay in your mortgage. In -- you know, it's hard for me to see Detroit -- you know, it'll never get back to the 1950, 1960 population numbers. I do think they could get back to the 1980, 1990 population numbers but it's going to take a right size in the public services that they're doing there. It's going to take some hard choices.

  • 10:30:58

    CHINNIAnd the other thing is what you're going to have in Detroit is -- if Detroit rises again, and I think Detroit will, I think it will bounce back to some extent. When it bounces back, in some ways -- the interesting thing when you go to the core of Detroit now is -- you know, there's a Whole Foods and there's a Starbucks. And it looks a lot like -- there are places you can go in Detroit -- there are places you can go in Detroit that look like hipster Brooklyn, right. They really do because that part of Detroit will rise and it'll attract the population.

  • 10:31:24

    CHINNIYou're still going to have the poverty all around it though. So you're going to have this great inequity within the city that you're seeing within all cities in the United States. It's just the way they are.

  • 10:31:31

    REHMAnd speaking of inequity, I'm sure all of us were sort of taken aback by this New York billionaire's high-rise with a poor entrance.

  • 10:31:50

    CHINNIIt certainly is shocking and surprising. And -- but on one hand, as someone who's followed -- I mean, this is an outgrowth of what's called inclusionary zoning whereas you want to build a unit. If you want to get higher density, then that's allowed. You agree to set aside a select number of units for lower income. And in this case it's -- another shocking aspect of it is, it's actually for people up to $50,000. So to me, it's another shocking thing that we're considering $50,000 to be low income.

  • 10:32:18

    CALABRIAIt is New York.

  • 10:32:18

    CHINNIBut it is New York. So, you know, part of this is just the outgrowth. You know, we were...

  • 10:32:23

    REHMBut we've got it here in Washington.

  • 10:32:25

    CALABRIAYes, we do have it in Washington.

  • 10:32:26

    GORDONWe have it here in Washington and we have it everywhere. And what we really need to talk about is that racial discrimination has not left our housing system. You know, we had that phrase redlining where banks used to put a redline around communities that they wouldn't lend in. Then during the housing boom you almost had reverse redlining where the predatory lending went straight to those places. And now those places are once again very credit constrained. And any effort toward integration is still met with a lot of resistance. And that's an emotional reaction, not a financial reaction.

  • 10:33:09

    REHMJulia Gordon of the Center for American Progress and you're listening to "The Diane Rehm Show." Here's an email from Laura in Millersville, Pa. who says, "With families paying so much of their incomes on housing and transportation, what's the economic impact on other activities like affordable medical care, school, clothes, going to a movie or a restaurant?"

  • 10:33:44

    CALABRIADiscretionary spending.

  • 10:33:45

    REHMExactly. It's all going into -- or most of it.

  • 10:33:51

    GORDONRight. And many of these families are what we call the families with the highest marginal propensity to consume, meaning if they get an extra dollar they're likely to spend it rather than to just put it in savings. But they don't have any extra dollars. Now you even saw that effect -- you mentioned at the beginning of the hour about still having a sixth of homeowners underwater. Many of those homeowners can afford their mortgage and are continuing to pay their mortgage. But because they feel like they are much poorer because they don't have any home equity, they're much less likely to spend their money. And that has that larger economic effect.

  • 10:34:30

    REHMMark, what about President Obama's national housing policy?

  • 10:34:36

    CALABRIAI don't really see it as that much of a departure from the housing policy we have had Bush, Clinton. I mean, there's certainly a change in rhetoric. I mean, I think there's a change in rhetoric in terms of rebalancing between renter and homeownership, which is new certainly. But under both Clinton and Bush there was lots of talk about more homeownership.

  • 10:34:53

    CALABRIABut I don't think -- if you look at the division of numbers and what's being spent on what programs, it's not all that different from where we've been. It's a continuation of the same housing policies, in my opinion, we've seen for 20 years.

  • 10:35:03

    REHMWhat about Fannie Mae and Freddie Mac?

  • 10:35:06

    CALABRIASo certainly we are in a limbo with Fannie and Freddie. You know, it would be my druthers that we would eliminate those agencies. I'm not fans of them. I'm not fans of giving any companies particularly special privileges that other companies don't get. I don't think they've actually been very beneficial for people at the margin. Just like the mortgage interest deduction, they've largely been a subsidy that has helped the upper middle class because the subsidy you get from Fannie and Freddie, as well as the mortgage introduction is a function of how big your mortgage is. So...

  • 10:35:32

    REHMJulia, how do you feel about Fannie and Freddie?

  • 10:35:36

    GORDONWhile I do agree with Mark that we need to reform Fannie and Freddie, I think we have to recognize that Fannie, Freddie and the Federal Housing Administration saved the housing market's bacon when the private capital markets froze up during the financial crisis. Had they not been there, we probably would've had a depression rather than a recession.

  • 10:36:00

    GORDONAnd still, as you see, the private securitization machine has not yet sprung back to life. Private investors are still feeling very burned by what happened to them. And thankfully, we've had that government backstop in the market to keep liquidity available.

  • 10:36:17

    CALABRIADiane, if I could make a point, and while it goes back to an earlier point, I guess I will make a historical correction. It's FHA, the Federal Housing Administration, that actually created redlining, not the banks. If you wanted to do business with FHA you had to do it with that redlining. And this is where it gets to the Fannie, Freddie, FHA point where I think Julia and I maybe have the biggest distinction.

  • 10:36:34

    CALABRIAWe built too much housing in many parts of the country. I think housing is still unaffordable. Places like San Francisco, median house prices are eight times median income. So for me, I think we want housing prices in the long run to come down. Does that mean it's going to have some negative economic implications in the short run? Absolutely. And so I often hear that if it wasn't for FHA, housing prices would've come down 25 percent. All said aside that I just don't think that number's credible. But even if you buy that number, the flipside of that means that housing prices are 25 percent more expensive than they would be had it not been for FHA.

  • 10:37:08

    CALABRIASo again, it gets back to this do we want housing to be expensive so everybody makes money who's a homeowner or do we want housing to be an accessible, affordable shelter over your head?

  • 10:37:18

    REHMMark Calabria. He's director of financial regulation studies at the Cato Institute. And when we come back, we'll open the phones. I see lots of you have good comments to make. I'll look forward to speaking with you.

  • 10:40:01

    REHMAnd welcome back. Here's an email from Joe, who works with the Homeless Persons Representation Project, in Baltimore. He says, "What about public housing? In Europe a significantly larger percentage of housing is publicly owned and it's not poor, run-down and undesirable. Isn't housing a human right?" Julia?

  • 10:40:36

    GORDONJoe, I completely agree with you and thanks for your call. I think that what Joe is talking about points to two things. First, something that we have here that his different than some other countries is because we have such diversity. You often have a race overlay on the conversation about things like public housing. But what I want to inject into the conversation, that we haven't talked about yet, is the need for some more innovation in this area. I know during the run-up to the financial crisis, financial innovation became a synonym for what Elizabeth Warren calls tricks and traps.

  • 10:41:15

    GORDONBut actually, you can innovate new types of products that give us other choices. Right now, if, you know -- and if you're talking about gentrification -- perhaps you have a choice between just renting and sort of full fee simple homeownership, you know, 30-year mortgage. What, you know, where you take the first loss position, if there's going to be a downturn in housing prices. So why aren't we doing a lot more talking about many successful models out there that just haven't scaled?

  • 10:41:50

    GORDONThat, you know, land banks, shared equity, you know, splitting the ownership of the land versus of the home, and, you know, co-ops, other kinds of structures that have been used successfully, but don't really have the national infrastructure to scale.

  • 10:42:06


  • 10:42:07

    CALABRIAYou know, first let me encourage Joe to go visit the Banios outside of Paris if he thinks that…

  • 10:42:11

    CHINNII was going to say, Paris they do.

  • 10:42:12

    CALABRIA…they, you know, I mean, there's this myth sometimes that I hear that, you know, and I've traveled extensively to Europe. They have not solved all their racial issues. It's not some everybody holding hands love fest in Europe. I mean, great. I encourage you to go, particularly to Italy. But that said, they've got tremendous problems there. They've got tremendous racial problems. I actually think one of the few smart things we've done in housing policy in the last several decades is stop building public housing on a large scale.

  • 10:42:37

    CALABRIAI think we concentrated poverty. I think we ended up, you know, doing tremendous harm to the families in question. So I think the fact that we've gotten people on vouchers, we've gotten people in suburban areas where their job is being created, and you can look at it, how it has tremendous amount of data on their website. You know, people who live in public housing versus somebody who gets a voucher, lives in the suburbs, lives in a better neighborhood with a better school district and has better life chances. So I don't think we should turn back the clock on that.

  • 10:43:03

    REHMAll right. Let's open the phones. We'll go to Berryville, Va. Hi, Ben. You're on the air.

  • 10:43:11

    BENThanks for taking my call.

  • 10:43:13


  • 10:43:13

    BENSo I guess my question is, is that I'm curious if there's a relationship between the rise of the two-income household and rising in housing prices. And then if that, in turn, when you have a two-income household that can afford to buy in a better school district and they're willing to pay for it, if that just kind of adds fuel to the fire and you end up with these, you know, these neighborhoods that are all two-income households, you know, successful parents, large tax based upon the best schools and then everybody else.

  • 10:43:46


  • 10:43:46

    CALABRIAIt sounds like I just got a summary of Elizabeth Warren's two-income family trap that was written about a decade ago. And I do think that that's an important characteristic, that when you have a fixed supply of housing in the locality of a fixed supply of good, affordable schools, that, you know, the two-income family just has it bidden up. And I think it's interesting that Elizabeth Warren says in her book that if you add subsidies to that, all you do is add the bidding war.

  • 10:44:09

    CALABRIAAnd so, again, the crucial part of that is how do we actually increase the supply of good housing, good school districts because, again, double income will just mean more bidding for those in the...

  • 10:44:20

    REHMAll right. To Athens, Ohio. Hi, Michael.

  • 10:44:26

    MICHAELDiane, thank you for taking my call.

  • 10:44:26


  • 10:44:28

    MICHAELI'm wondering if there's any kind of like a national strategy regarding how we spread the country out where you can work and live. My father was in the military and so every two years we were on the road and spent the '60s and '70s in Washington, D.C. But I'm here now and I just noticed that Appalachia has got a lot of resources in it, but it's fairly empty, except for a few dots of cities, like you say, Toledo and Columbus and stuff like that.

  • 10:44:57

    MICHAELThere's -- is there any kind of thing that just looks at the United States as a whole and says, well, maybe we ought to move a few of these things to someplace else instead of the crowded coasts?

  • 10:45:10


  • 10:45:11

    CHINNIWell, they're going to, I mean, people chase jobs. Right? People chase employment. And you've got to -- if you can -- the thing you -- the reason why things are increasingly clustering on cities is this -- God, there's tons of reasons. But, like, death of small manufacturing, even mechanization of farming and how farming has become a much more industrialized process. All these things mean there are fewer jobs in rural places. And the jobs that are concentrating in big cities are places that thrive on -- what do they want?

  • 10:45:38

    CHINNIThey want transportation, they want an educated workforce and they want -- and those things are increasingly -- involve density. The one place that I see when I look at my data, that stands slightly apart from the -- the big cities are like this. The one thing that stands slightly apart from that trend is college towns because Google likes to be near brains. Right?

  • 10:45:56

    CALABRIAThat's true.

  • 10:45:57

    CHINNIAnd then you see a little bit of state capitals. State capitals because you have -- it's the same thing. Often you have a college there to begin with, but then you have a more educated populous and there are people who need to be there to do business with the government.

  • 10:46:11

    REHMAll right. To Chuck, in Pittsburgh, Penn. Hi there.

  • 10:46:16

    CHUCKHi. Thanks for taking my call.

  • 10:46:18


  • 10:46:18

    CHUCKI have a little different perspective then what I've heard this morning on your show. Just five seconds of background. I've been in the affordable, non-subsidized housing/apartment market here in Pittsburgh for about 40 years. And what I have found is that any landlord who allows a tenant to move into his building with higher than about a one-third rent to gross income rate is looking for disaster.

  • 10:46:51

    CHUCKNow, what I have also found is that my rental rates then are driven by the wages or the income of the tenant base -- prospective tenant base that's out there. So I've found over the last 20 years, as an example, in contradiction to what one of your guests said, that our rental rates have gone up by about a third in 20 years. So I guess my contention is that rents are based upon what the market can pay. And then the landlord has to figure out how to make it work.

  • 10:47:27

    CHUCKAnd this becomes more and more difficult as time goes on because it is an aging housing supply and we have to find more creative ways to take care of these properties. Just to give you an idea, our rents in Pittsburgh here -- I just checked -- a two-bedroom apartment, with some to all utilities paid, are less than $600 month. And that means that someone earning $23,000 can live in a two-bedroom apartment that's well cared for.

  • 10:47:55

    CHUCKI'm not talking about slum-lord type stuff. So I would just ask you to take a little different thought about this, to think about this a little bit differently. And we're not in the X-burbs or the rural area.

  • 10:48:10


  • 10:48:10

    CHUCKWe're in urban areas.

  • 10:48:11

    REHMJulia, do you want to comment?

  • 10:48:13

    GORDONWell, one of the reasons it's so hard to talk about this -- and I'm sure this is what Dante has found -- is it's very hard to just make national…

  • 10:48:22

    REHMGeneralizations. Of course.

  • 10:48:23

    GORDON…generalizations and averages. This is true on both -- on the homeownership side and on the rental side. And it makes it very difficult to deal at the federal policy level with this. It is very important that this be engaged on the state and local levels. I also think it's important that we raise up affordable housing as an important political issue, you know, in our campaigns and in our governments.

  • 10:48:50


  • 10:48:51

    GORDONBecause it's really fallen off the radar screen with the exception of the foreclosure crisis -- there was talk about that. But really the overall topic has, you know, not risen to the top of the agenda for quite some time. And I think we're ready for that to change.

  • 10:49:09

    REHMAll right. Chuck, I'm glad you called. And let's go to Liz, in Vancouver, Washington. You're on the air.

  • 10:49:20

    LIZThanks very much for taking my call.

  • 10:49:22


  • 10:49:23

    LIZMy question is, I wonder if anyone has considered changing the tax structure because, you know, a lot of times these homes that are affordable to people are purchased by investors who then turn around and rent them and use them as income property, as opposed to having housing that's available for people. So I wonder if there's any kind of suggestion or idea about changing the structure so people who…

  • 10:49:49

    REHMI bet you have some, Julia.

  • 10:49:51

    GORDONWell, it is an interesting development. You know we have always had investors -- and this is particularly noteworthy right now in the single-family market. We have always had single-family rentals. I grew up in single-family rental. But we have more single-family rental now then we've had in a long time. And we have the entry of a lot of large institutional investors who are getting extremely cheap financing for buying these homes by actually securitizing their rental portfolios. You know, just like we securitize mortgages.

  • 10:50:32

    GORDONAnd combined with many of the tax advantages that are enjoyed in the securitization context and the rate context, it is not really a level playing field right now. If you have a lot of cash, a lot of investors looking for yield, and they think the single family rental market is a good place to be, it is very hard to compete with that. At the same time, we don't have a lot of regulatory tools to address that.

  • 10:51:00


  • 10:51:01

    CALABRIASo let me -- first, Diane, as I've repeatedly said in the past, I'm, you know, massively in favor of tax simplification and of course that means leveling the playing field, getting rid of a variety of deductions. That said, you know, I think the investors have not necessarily been a bad thing. They've certainly helped put a floor under prices…

  • 10:51:16

    GORDONThat's true.

  • 10:51:16

    CALABRIA…in places like Phoenix. I know it's a little tension now, but when they start to peak out in prices, those investors are going to sell those houses back in the marketplace.

  • 10:51:25


  • 10:51:25

    CALABRIAWe've, in fact, already seen that with some of the bigger institutional investors, that they've started to unload those houses back into the marketplace. So I think you actually need another source of liquidity in the housing market that will bring more stability to the housing market.

  • 10:51:36

    REHMBut, you know, there's been a lot of talk here this morning about density. And even here in Washington you see condos going up all over the place. Has the -- we presume more affordable -- condo become a substitute for that brick-and-mortar house?

  • 10:52:02

    CHINNII think in big cities it definitely has. Your starter home in a big city is a condo. I mean, if you're going to live in a city, that's what you're going to do. Buy your old studios, that space that had been empty forever is going to become a big condo.

  • 10:52:12

    REHMHuge condos.

  • 10:52:14

    GORDONBut those condos are going to sell for more than my house.

  • 10:52:16

    CHINNIThey will.

  • 10:52:16

    GORDONMy single family house on a third of an acre in the suburbs.

  • 10:52:19

    CHINNIThey will, yeah.

  • 10:52:20

    CALABRIAAnd interesting. So during the housing bubble, the biggest percentage point increase in home ownership were families under 25. And so a lot of this were actually single individuals, rather than families. But we saw this big boom and bust in young households buying homes. And that was predominantly a lot of condo purchases. And I think that's a question we need to make. Is the other side of it is when you were 24 or 25 you were much more likely to change jobs.

  • 10:52:43

    CALABRIAYou've got a looser attachment to the labor market. So, you know what I mean? I'm not saying that everybody should do like I did and wait until they were 30 to buy their house, but it's not necessarily a bad strategy.

  • 10:52:52

    REHMAll right. To Nicholas, in Raleigh, N.C. And you're listening to "The Diane Rehm Show." Nicholas, you're on the air.

  • 10:53:03

    NICHOLASHi, Diane.

  • 10:53:03


  • 10:53:03

    NICHOLASI just want to say I'm a long-time listener. Love your show. I've been listening ever since I was little kid riding in the car with my dad.

  • 10:53:08

    REHMThat's lovely. Thank you.

  • 10:53:10

    NICHOLASMy question was about actually gentrification and the whole issue of you have people who have been living in their homes for decades. They've paid off their homes. They've been good citizens. And as the area gets gentrified, for better or for worse, their property taxes go up. And what can we do for those people? Because surely they deserve better than to basically forced out of their homes because they can't afford to pay the property tax.

  • 10:53:36

    GORDONYou have some jurisdictions beginning to grapple with exactly this problem, and beginning to cap property taxes or provide some property tax relief to long-time residents in those areas. I think that's a very important strategy that we can deploy to ameliorate some of the impacts of gentrification on existing homeowners. We also have to think about the impact on renters and what the strategies are that we can employ to keep rents affordable or maybe to offer, you know, co-ops or shared equity or other types of hybrid solutions.

  • 10:54:13

    REHMAnd a number of people have emailed wanting to know about the internet and about pushing for more virtual offices, could allow people to live where cheaper housing is available while working…

  • 10:54:33


  • 10:54:34

    REHM…in the more expensive urban areas.

  • 10:54:36

    CHINNIYes. I mean, I think this is the great -- in some ways I think this is the hope for rural America because rural America is bleeding people. It's just -- people are leaving. And the older population is dying off. So it's a lot of empty space. I do think, though, that sometimes the idea of the virtual workplace -- I think we overestimate what we can do with that.

  • 10:54:55

    REHMCan get awfully lonely.

  • 10:54:56

    CHINNIRight. And also I think that the idea that you're, you know, it's one thing to be, like, I want you to work from home two days this week and you're 20 miles away. And -- but I still want to see you the other couple days. It's different then -- that's a different thing then saying, I live 500 miles away from my office. I never see my boss. And some people can do that, some people don't have the discipline to do that, some people don't want to do that.

  • 10:55:15

    CHINNITo be honest, I'd, you know, I mean, I guess if you're a novelist, right, that's what you do. But I mean, if you work in an office, the idea of being around -- working as a journalist, being around other journalists, there's something to be said for the collaborative process of being…

  • 10:55:27

    REHMHow widespread do you think that practice is likely to become?

  • 10:55:36

    GORDONWell, there are many industries where people working from home is very viable. Any kind of call center or the like, you can distribute it and that's being down now. A lot of -- in fact a lot of the jobs we've off-shored could go to people in rural America instead. And I think we have a growing number of businesses where you could come up with that strategy. You still have resistance at the management levels. And…

  • 10:56:02

    REHMAnd one point there…

  • 10:56:03

    GORDON…it's still not that many jobs.

  • 10:56:05

    REHMOne point there, at the management level, what about employers who demand that their employees, like the police force, like fire personnel, live in the city that employs them?

  • 10:56:22

    CHINNII think that's a very important point. I think the other thing that's really crucial is that beyond call centers, a lot of these jobs -- the idea that you're going to work from home requires a certain amount of education and skill. They're creative jobs, a lot of these jobs. And the idea that -- and that's not to say those people aren't in rural America, but the problem we have is that rural America is less educated. It's -- we need to change a lot of things first.

  • 10:56:45

    REHMAll right. Well, we clearly have not solved the housing problem this morning. We'll be watching it in this space. Dante Chinni, Julia Gordon, Mark Calabria, thank you all.

  • 10:57:02

    CALABRIAThank you.

  • 10:57:02

    GORDONIt's a pleasure.

  • 10:57:02

    CALABRIAThank you.

  • 10:57:03

    REHMThank you. And thanks for listening all. I'm Diane Rehm.

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