Affordable Housing’s Dirty Little Secret

I am not an economist and in this article, won’t pretend to be. Economic theory often confuses me–but I’m not alone. Our nation is 23 trillion dollars in debt and very few seem to care.

But I am an American, a parent and a follower of Christ involved in helping people improve their circumstances by the blessings of God–both in this life and the next.

Thus, I’m concerned that as we reach the twenty-year mark of the 21st century (2020), most young adults I know can’t afford to buy a house in the wealthiest nation on earth.

I think I know why.

Affordable Housing’s Dirty Little Secret

I was tempted to title this article “Why My Kids Can’t Afford to Buy a Home”–which has some truth to it but also seems a bit personal. Two of our children work in the entertainment industry in California, and others in Washington are successful in real estate, banking, and managing a coffee business that reaches out to homeless youth.

Only one of them owns a home. Another will inherit ours when we’re finished. I have concerns about the rest as I do for many other friends in the prime of life.

Victor Davis Hanson gave a speech recently at Hillsdale College where he lamented the increasing threats to America’s middle class. He pointed out that home ownership is down to about 62 percent from 71 percent just over ten years ago. He said that the percentage of the family budget that goes to housing has risen from 20-30% in the 1950’s to 30-40% today, especially in the coastal corridors (the left coast and eastern seaboard).

So why can’t an increasingly large segment of the American population not realize the blessing of home ownership with no housing payments in their latter years (like my wife and I now enjoy)?

Some people call it a housing shortage. But are we really “short” on houses that could be built or land on which to put them?

Hardly. The entire world’s population could fit inside the state of Texas–with each person enjoying a standard of living far in excess of what is now available to them. The world is actually empty (as most who fly on planes see with their own eyes) and there are plenty of trees for lumber and clay for bricks to house billions more people.

No, the problem is not houses and land.

So what is it?

One major problem is civil government. Those who say they want to help are actually the heart of the problem. That’s the dirty little secret that the politicians don’t want you to know.

The federal government is the primary villain by inflating the money supply for the past forty years. They do it in two different ways.

First, through what is designated M1 to M4, the Federal Reserve creates cash out of thin air to keep the banks solvent.

M1 includes currency and money in checking accounts. M2 includes all of M1, plus savings deposits, time deposits and money market funds. M3 is a measure of the money supply that includes M2 as well as large time deposits, institutional money market funds, and larger liquid assets. M4 money supply is defined as a measure of notes and coins in circulation.

The latest money supply figures in the U.S. show nearly 4 trillion dollars in circulation.

A second and more confusing way the Feds create fiat money is through “quantitative easing” which took place in three moves between 2010 and 2015 (QE 1-3). Fed chairman Ben Bernanke utilized this approach to add liquidity and reserves to the financial system when it seemed the banking industry was on the verge of collapse.

Nancy Davis explains how QE works. “The Fed buys specified amounts of financial assets, thus raising the prices of those financial assets and lowering their yields.” This action pushed down interest rates across the board with such large (“quantitative’”) actions, making borrowing cheaper for consumers and businesses alike (that’s the “easing” part). “The idea,” says Davis, “is that individuals and corporations could borrow money cheaply for a long time, stimulating the economy.”

Here’s a layman’s translation for M1-4 and QE 1-3:

Monopoly money.

Remember what happens when the  Monopoly Game “banker” wrongly distributes all the cash to the various players? Voila! Prices skyrocket (especially real estate) because there’s more cash to bid up the prices.

Now you know the main reason for rising home costs since the 1970’s.

Shirley and I worked and saved (with the great help of family and friends) to build our first home in 1989. We were able to construct a 3400 square foot house across the water from Seattle for $71,000. Our mortgage payment (even at 8 percent) never topped $420 a month.

Any family at that time (in the lower or mid-income brackets) could  have done the same thing.

But because of M1-4 and QE 1-3, we sold that home in 2013 for four times the cost of building it ($305,000).  That was “good for us”–but not really because the money wasn’t worth what it used to be and the price was putting homes out of the reach of some people.

It’s only gotten worse in the past decade.

Monopoly money is not the same as real money. America used to operate by just weights and measures by having all currency backed by gold (until the 1930’s) and a gold “peg” through the 1970’s. “As sound as a dollar” used to mean something–that what you could buy with $1 now would cost the same amount fifty years later.

That’s laughable today. Increasing the money supply by federal fiat has caused housing pries to soar. A smaller home on our street sold for $450,000 two years ago. In Seattle and many other places, medium-priced homes are now in the $800,000 to 1 million range.

The Feds are responsible for this vicious form of price inflation.

But local governments have also exacerbated the problem.

Five years ago YWAM Discovery Bay came up with an architectural  master plan for updating and providing needed housing for our beautiful 13-acre property near Pt. Townsend, Washington. I submitted the architectural plans to the Jefferson County officials along with others from our leadership team.

For nearly two hours we excitedly talked about the plans for a new main lodge, staff housing and other amenities. Construction, plumbing and septic inspectors all gave input while one Jefferson County official remained silent.

After every other person had signed off and given advice, the zoning inspector arose and announced to the crowded board room: “You can’t do any of that. There are zoning restrictions in this county. You can’t build more than 3000 square feet on your 13 acres–but you can bring in up to 30 travel trailers” (park models).

We were stunned and confused. Why had they wasted our time and money when one man knew that the local government regulations were squarely aimed at prioritizing animal habitat while restricting human beings?

We’re still using trailers to this day.

County government zoning restrictions (and many other regulations and fees) have produced low “supply” for homes and created high “demand” in prices.

Even with two income households (never before needed in American history), federal government fiat money and county government zoning regulations are forcing most people into “urban village” apartments (at $1000-$2000 a month) with little hope of home ownership.

For our kids and grandchildren.

This dirty little secret is killing one of the fruits of the American dream–home ownership.

And some day those policies may come back to bite us harshly (financial collapse?) making many more people homeless.

Let’s vote for leaders who believe in sound money and put people-first.

Because there’s no place like home.


  1. Roger Duryea on December 12, 2019 at 7:13 pm

    Thank you, Ron, for your insights.

    I am also very concerned as a parent and grandparent of nine, how the next generation will afford to live here.

    We had an economist at a recent meeting discussing the housing market forecast for today and beyond and while that all sounds great for those who are in home ownership, it is becoming a fleeting dream for most young people.

    It has also required two incomes under one roof just to maintain an average live style (housing, food, transportation, etc.).

    I believe Senator Rand Paul has sounded the alarm many times about the run away government spending/debt and made suggestions of how to turn the tide but to no avail.

  2. Karen Altman on December 12, 2019 at 6:39 pm

    But local governments have also EXASPERATED the problem.
    The correct word should be: EXACERBATED.

  3. Roger Cresswell on December 12, 2019 at 5:20 am

    During President Trump’s second term in office there will be an ever increasing movement to make the Fed
    obsolete. We all know the Fed rate would be much higher if it wasn’t for POTUS putting a spotlight on the problem. Much reform is needed with global elites manipulation of US currency.

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