Housing affordability is a major political issue in the United States, and Louisiana is no exception. Pre-pandemic, the median rent in Louisiana was $866. Currently, it is $1,020.
Fortunately, officials in the Pelican State are working hard to address this challenge.
For example, in December, community leaders in Shreveport announced a $38.1 million investment to upgrade and expand affordable housing. This investment is more than symbolic — it represents an understanding that all parties must work together to expand the housing supply.
The 2024 presidential election featured much finger-pointing about the “true cause” of the increase in housing costs. The right blamed illegal immigration, while the left blamed “greedy” landlords. More recently, algorithmic pricing has become a prime target, spawning an antitrust lawsuit from the Department of Justice.
The proposed policies — rent control, immigration restrictions and algorithmic software bans — will not solve the problem of high housing costs simply because they address the symptoms, not the causes.
But some politicians just can’t help themselves — they need to assign blame and attempt to codify it, if only to justify their support for bad policies.
In January 2024, several U.S. senators introduced legislation to prohibit the use of algorithmic software in the housing rental market. Fortunately, this bill was not passed into law, and hopefully, Louisiana’s representatives, including Speaker Mike Johnson and Majority Leader Steve Scalise, will ensure that this type of legislation doesn’t see the light of day in the 119th Congress.
We need to understand why housing prices have risen. One primary driver is the increase in the money supply unleashed by the federal government’s response to the COVID-19 pandemic. The Federal Reserve pumped approximately $6.3 trillion into the economy from March 2020 until April 2022 — the most significant increase in the money supply in US history. This increase led to too much money chasing too few goods, naturally causing inflation. The prices of everything increased — including shelter.
To combat inflation, the Federal Reserve began increasing its interest rate target. This, in turn, led to higher mortgage rates, making it more difficult for those who want to buy a home, turning them into involuntary renters and pushing up rents. We need not resort to “greed” as an explanation when simple economics will do. However, inflation alone does not explain the increase in the cost of shelter. There are two other major structural issues facing the Louisiana and national housing markets: NIMBYism and construction costs.
NIMBYism (short for “not in my backyard”) describes a broad set of policies that restrict housing or other development. These include zoning regulations to prevent certain kinds of construction or use restrictions. On Dec. 30, the New Orleans City Council voted to rezone a 25-acre tract of land in Algiers from multifamily to single-family. By doing so, far fewer housing units will come to the market, keeping the prices high.
NIMBYism may serve legitimate purposes in limited cases, but all restrictions on housing necessarily increase the price of homes. As the great economist Thomas Sowell once said, “There are no solutions, only trade-offs.”
Unfortunately, there are no easy answers. Rent control decreases both the quantity and quality of units on the market. Furthermore, a black market for rentals often appears, leading to poorly regulated and dangerous living conditions. The issues surrounding immigration can’t be solved at the state level. And no serious economist believes a software program is responsible for high rental costs.
The housing affordability crisis demands economically sound solutions that tackle the root causes instead of scapegoating the symptoms. At the national level, reducing federal spending to manage inflation and interest rates is a necessary measure.
Meanwhile, state and local leaders must address the housing shortage by committing to reforming restrictive zoning laws and fostering innovation in construction — just like they did in Shreveport. Louisiana’s future hinges on its ability to balance growth and affordability, ensuring that housing policies prioritize the needs of its residents over politics or ideology.