Don't Buy the Social Housing Hype

Cities become affordable when they build a lot of housing, not when they subsidize it.

The high cost and limited availability of housing in many American cities have some writers and wonks dreaming of a seemingly novel solution: social housing.

The idea is to have the government build or subsidize housing developments in which units would be provided at generally below-market rates for people of all incomes.

Last week, The New York Times published a long profile of Vienna, Austria's extensive, century-old social housing program that's turned the city into a "renter's utopia."

In Vienna, author Francesca Mari writes, 80 percent of city residents qualify for public housing, and social housing tenants spend only about a fifth of their post-tax income on housing. Mari also interviews a number of higher-income social housing residents who spend less than 10 percent of their earnings on housing.

That's contrasted with America as a whole where the average renter pays 30 percent of their income on rent (and much more in some higher-cost cities).

We could have those lower housing costs too, Mari says, if only Americans would abandon their obsession with mass home ownership and the subsidized mortgages that make it possible.

Meanwhile, over at Slate, tenant organizer Daniel Denvir and researcher Yonah Freemark argue that no amount of new, private, for-profit housing development will make housing truly affordable. For that to happen, the government should "just build the homes."

"State and local governments can take on this task by building millions of homes themselves, particularly for poor and working class people, that private developers won't construct," they write. "These public and social housing projects can ensure permanent affordability, support mixed-income neighborhoods, and bring new assets onto public balance sheets."

Liberal blogger Matt Yglesias offers some pointed pushback to all this in his Slow Boring newsletter today. Vienna isn't cheap because it builds social housing, he argues, but because it builds a lot of housing, period.

The city boasts per capita construction rates that make it look more like a Sunbelt boomtown than "closed access" underbuilding cities like New York City or Los Angeles. In recent years, two-thirds of Vienna's new housing is also private, market-rate housing.

Yglesias also notes that the city's social housing units are also pretty small by American standards, reducing costs further. Given these facts, Yglesias reasonably asks what problem social housing is solving that reduced regulations on private, market-rate housing wouldn't.

Indeed, it's hard to say.

As the Times article notes, residents of private housing in Vienna spend only a little bit more of their income on housing than social housing tenants. I've reported in the past too that in Austria as a whole, social housing residents on average have slightly higher incomes than private housing residents.

In other words, private providers are willing to build and rent out housing units at affordable rates to the same class of people that are served by social housing. In this light, Vienna's social housing is at best duplicating what the private market is doing. It isn't serving an unfilled niche.

For more evidence that it's the rate of new supply that counts, not government subsidization of new supply, we need only look at New York City.

In 2022, New York City completed nearly 26,000 new housing units, according to a new report by the city's Rent Guidelines Board. Data provided by the city's Department of Housing Preservation and Development shows that 12,000 new subsidized, affordable housing units were completed at the same time.

So nearly half of the city's housing production last year was government-subsidized, affordable housing. In relative terms, the government appears to be playing a larger role in new housing construction in allegedly ultra-capitalist New York City than in "Red Vienna."

New York nevertheless remains one of the least affordable cities in the country. That's because its overall rate of building is far lower than Vienna's. It's also likely far less than what developers—liberated from restrictive zoning rules and affordable housing mandates—would be likely be willing to build.

Zoning reforms that get government supply restrictions out of the way would seem to provide most of the benefits social housing proponents want.

They would also avoid the risks that American social housing projects would end up being botched, authoritarian boondoggles on par with existing public housing developments.

From New York City to Washington, D.C., to rural Arizona, public housing facilities are infamous for being poorly run and maintained. Here in D.C., nearly a quarter of public housing units are vacant, thanks to a mix of uninhabitable conditions in some apartments and the local public housing agency's inability to manage its waitlist.

A recent Washington Post investigation detailed the insane surveillance public housing tenants have to put up with. Many public housing developments have more cameras per person than heavily surveilled airports and jails.

Proponents of social housing like to argue that their vision of mixed-use, mixed-income developments will avoid these problems. Maybe. Maybe not.

Yglesias notes that the small size of Vienna's social housing units wouldn't be particularly attractive to middle-class Americans. These developments could end up with the same concentrated poverty that's marked the public housing of old.

The surveillance likely isn't going away either.

Hawaii state Sen. Stanley Chang's (D–Honolulu) social housing proposals call for restricting the housing to Hawaiian resident owner-occupiers. To enforce that condition, he proposed back in 2021 to have residents' fingerprint or retina scans checked against a government database every time they enter their homes.

It is true that without social housing fewer high-income earners would get massively subsidized rents and amenities.

Mari, the author of the Times story, interviews left-wing Austrian politician Peter Pilz who inherited a dirt-cheap social housing unit from his grandmother. Able to effectively live for free back home, Pilz spends the savings on Italian biking holidays.

In a free market where he had to pay the full costs of his housing and the opportunity costs of the capital used to build and maintain it, Pilz would have less money for such extravagances. That's a loss for sure.

But fewer subsidized vacation days for dilettante politicians seems like an OK thing to sacrifice in favor of a free market system that respects people's property rights and privacy while providing them with abundant, affordable housing.