Got it half right............................

 I would love to see a situation where politicians make housing their entire platform. Tear up all of the red tape. Incentive homebuilders to build more homes. Offer first-time homebuyers low mortgage rates they missed out on.

-Ben Carlson, from this post

The affordability problems in our current housing market is being caused by that pesky law of supply and demand.  The supply has been constrained for the past thirteen years for multiple reasons.*  Demand was unleashed seven or eight years ago by absurdly low interest rates and by a generation that ignored the experts that said they would be "urbanized."  Left to their own devices, our kids said "screw the big cities, we want a single-family house with a two-car garage and a yard."  When overheated demand meets constrained supply, you get doubling of prices in a very short time frame—and an affordability problem.  Slowly but surely, supply is picking up—but it will likely take another five years before the supply actually meets the demand.  Be very careful of offering subsidies to buyers in a market like this.  Those subsidies will just end up in the pockets of sellers.  Stoking demand in a tight housing market is a recipe for higher home prices.

If you want to solve the affordability problem, subsidize homebuilders and developers.  They will then do what they always do when incentivized—over build.  Then, and only then, will affordability stand a chance.

*The supply of housing has been constrained by a combination of factors that include, but is not limited to, the following:

    1.  The Great Recession of 2008ish was caused in part by super-heated housing construction.   After the dot.com bubble burst, the construction industry became a major engine for keeping the economy perky.  By 2003 more homes were being built than could be sold to traditional home buyers.  Not wanting to stop the gravy train, politicians decided we should sell those new homes to buyers who could not afford them.  This was cleverly done by fiddling with the requirements for securing a mortgage.  2004-05 was the wild west of mortgage lending.  All you needed to get a loan was to be able to fog a mirror.

    2.   The Great Recession caused multiple defaults on those non-traditional mortgages.  All of a sudden there was a massive supply of available homes and no demand.  Naturally, prices fell.  Homebuilders could not compete with prices of this surplus inventory, so they did the sensible thing and left the industry.

    3.  About the same time all this was going on, our society decided that everyone needed a four-year liberal arts college experience.  We suffered a collective amnesia about the importance of training the next generation of plumbers, electricians, HVAC technicians, carpenters, roofers, etc.

    4.   In 2003 there were probably 15 home building companies in our community (of about 80,000 folks).  By 2013 there were only three remaining.   

    5.   Guess what happens when there are only a handful of tradespeople in a market that needs a bushelful?   Those trades people, for the first time in memory, had pricing power.  All of a sudden, construction labor prices started rising—quickly.

    6.  The onset of Covid led to the snarling of supply lines and the interruption of the production of building materials.  The just-in-time theory of inventory doesn't work very well when there are disruptions.  Those building product suppliers, for the first time in memory, also had pricing power.  Prices for plywood, concrete, drywall, etc. all shot through the roof.

    7.   Increasing governmental regulations (zoning and NIMBY opposition to change, density restrictions, subdivision regulations, green space requirements, turn lanes and deacceleration lanes, impact fees, sewer/water tap fees, and a myriad of other useful improvements) confronting developers of subdivisions has made the development process more expensive and more time consuming—a tough combination which impacts affordability,

    8.   We should not forget that residential real estate markets are local in nature, and while your results may vary, the affordability problem is a supple and demand problem, and it will  take time to resolve.