The housing affordability crisis has no easy solutions, but research has shown a tight correlation between tougher land-use regulations and higher costs, Atlanta Fed President Raphael Bostic said on Friday.

Speaking at Tulane University in New Orleans, he began his remarks by saying “Housing is so foundational to family well-being and security that one could argue that it transcends economics,” noting that good housing contributes to better outcomes in other areas, such as education and employment.

He added that racial disparities in the ability to tap housing equity are also critical for any policies meant to advance economic mobility and resilience.

“Unfortunately, today, housing—both as shelter and an investment—is not working as well as it could for too many of our neighbors,” Bostic said, according to his prepared speech. “In the generally thriving metropolitan centers of the Sunbelt, in the major cities of the coasts and the Midwest, and even in smaller towns and rural communities, housing is unaffordable for far too many.”

He pointed out that the nationwide median income for a household is about $75,000 a year, and Americans must spend 41% of that amount to own a median-priced home, which costs about $359,000. That’s far above the 30% standard threshold for affordability.

And in some communities, the percentage is even higher. In the Miami-Fort Lauderdale-West Palm Beach region, for example, Bostic said the median-price home sucks up 54 % of household income. Renters also face similar burdens, he added.

“I’ve talked mainly about metropolitan areas,” he said. “But rest assured that affordability is a concern in rural places as well. The issue takes on a different cast in rural areas. Median incomes are lower, and in many cases housing quality, even access to infrastructure such as sewage, are pressing concerns.”

Despite the gloomy statistics, Bostic expressed some optimism when discussing housing policy experiments, pointing to efforts to relax zoning rules in Florida and Minnesota. Other hopeful signs include the promotion of manufactured and prefabricated homes to boost supply, while market forces are also boosting production, he said.

Still, Bostic highlighted data that show land-use regulation overall has been getting stricter. And that could offer a clue to the housing crisis.

“A quick exercise by Atlanta Fed researchers revealed a tight correlation between the restrictiveness of land use regulation at the county and metro area levels and the unaffordability of housing, based on our Bank’s affordability monitor,” he noted. “Not surprisingly, perhaps, it appears that the tighter the regulatory environment, the costlier the housing market, broadly speaking.”

To be sure, the affordability crisis is a “vexing, incredibly complex puzzle” that defies easy solutions, Bostic said, acknowledging that he raised more questions than answers.

His remarks come as earlier hopes that lower mortgage rates would improve affordability have been tempered. Signs of sticky inflation have pushed out timelines for when the Federal Reserve might lower benchmark interest rates. That has sent Treasury bond yields and mortgages rates back up in recent months after they tumbled last fall.

Now, homeowners who took advantage of low rates during the depths of the pandemic are reluctant to buy a new home and finance at higher rates, resulting in a “lock-in effect” that has limited the supply of homes on the market.

Meanwhile, the salary Americans need to buy a starter home has nearly doubled since the pandemic, according to Redfin data, and the down payment on the average home has jumped 25% in the last year alone, a separate Redfin report said.

To keep up with higher housing costs, homeowners are making more sacrifices, like skipping meals and selling their belongings.

“Housing has become so financially burdensome in America that some families can no longer afford other essentials, including food and medical care, and have been forced to make major sacrifices, work overtime, and ask others for money so they can cover their monthly costs,” Redfin’s economics research lead, Chen Zhao, said.

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