Housing: Blue states make it ‘difficult to build,’ red states ‘allow’ markets to meet demand, says NYT podcast

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New York Times' The Ezra Klein Show published a new episode Tuesday featuring a discussion with economist Jenny Schuetz. During the podcast, Schuetz highlighted how regulations in Democrat-run states have contributed to a housing affordability crisis. 

"I’m circling this question of why liberalism so often fails to build, most of all in the places liberals hold the most power. And there’s no more damning or central example of this failure than housing," Klein said in the introduction.

"The five states in the U.S. with the highest rates of homelessness are New York, Hawaii, California, Oregon and Washington. Some of the bluest states in the country, not one red state on that list," Klein said. "And they are consistently unable to build enough homes at prices people can actually afford." 

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A large homeless encampment along the Santa Ana River Trail in Anaheim. (Reuters/Mike Blake)

Rent prices in Manhattan reached a record $5,000 per month in June. Lack of housing affordability has become a major problem for many Americans, especially young people. 

"And at the core of that failure is the failure to build enough homes, full stop. And that means working class people can’t live where the wages are highest. They can’t live where the opportunities for them are most promising, where the safety nets are most expansive. That means people who might want to live in, say, states that guarantee abortion rights, can’t afford to," he said. 

He noted how climate-conscious states are driving prices that end up undercutting their own policies. Like how California building green energy infrastructure is pushing people further away so they have to drive longer distances or to live in states that are more fossil fuel-friendly.

Schuetz agreed. It is "true that many of the Democratic administrations, at the state and local level, have imposed a lot of rules on the construction process that make it difficult to build housing," she said.

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"And they’ve done this in some cases based on progressive things like, we want to protect the environment or we want to give voice to people in the community and let them weigh in on what happens to their neighborhood," she continued. 

However, Schuetz argued that there are drawbacks. "But the downside has been it makes it really hard to build and especially for supply to respond to the increase in demand," she said.

"So blue places have chosen to make their housing supply inelastic — to use econ speak — and red places, by and large, have allowed housing markets to continue functioning and for supply to respond when there’s an increase in demand."

Schuetz said that low income families "are deprived of basic needs because so much of their income is devoted to housing costs." 

She said "the poorest 20 percent of households" are "spending over half of their income in rent."

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Schuetz also pointed out that "a lot of the homeless people in California are employed." However, despite this, they are still unable to afford rent. 

"They have a job. They have family. They have networks. So they have a life there. But they’re living in their car because they can’t afford to pay for an apartment," she said.