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With a national shortage of 2.5 million homes, a $65 billion federal investment in affordable housing would yield three times as many housing units if focused on affordable-to-build regions like the Midwest and South, compared to expensive coastal cities. This strategy could create 36% more total wealth for low-income households by maximizing construction efficiency and supporting migration to growing, lower-cost metros. The core of the argument rests on the significantly lower land and labor costs in cities like Indianapolis, Houston, and Atlanta.
Why is it more cost-effective to build affordable housing in certain regions? The primary drivers of new home construction costs are land and labor. In affordable U.S. regions, these costs are substantially lower. For example, land accounts for only about 20% of home value in cities like Indianapolis and San Antonio, compared to over 50% in San Francisco. Furthermore, construction labor costs differ dramatically; the median salary for a construction laborer is approximately $36,300 in Indianapolis versus $56,400 in the Bay Area. This cost disparity means a federal budget stretches much further. Building a 1,000-square-foot home costs an average of $107,000 in Indianapolis but over $988,000 in San Francisco.
What are the tangible outcomes of a cost-efficiency focused strategy? An analysis of a proposed $65 billion budget reveals stark differences. Prioritizing affordability over expensive coastal areas could produce over 778,000 housing units, compared to roughly 257,000 units under a plan focused on high-cost cities. While each home built in a costly metro may generate more individual household equity (the value of a property minus any loans against it), the sheer volume of homes built in affordable metros creates greater total wealth. The analysis projects a total wealth creation of $194 billion by building in affordable areas, compared to $143 billion in expensive ones.
| Metric | Building in Expensive Areas | Building in Affordable Areas | Change |
|---|---|---|---|
| Avg. Govt. Cost per Unit (after sale) | $252,897 | $83,450 | -67% |
| Total Units Built | 257,022 | 778,913 | +203% |
| Wealth Created per Household | $555,451 | $248,521 | -55% |
| Total Wealth Created | $143 billion | $194 billion | +36% |
How does migration trends support this approach? Americans are already migrating to more affordable regions at increased rates. Cities like Dallas, Kansas City, and Cleveland have seen a significant influx of new residents. A federal policy that builds housing in these destinations aligns with existing population movement, making it easier for families to relocate to areas with lower costs of living and growing job markets. This approach could also include support for moving costs and job creation incentives. Based on our experience assessment, this strategy could also set a precedent for assisting households moving from areas with high climate-related risks.
What makes this strategy politically feasible? A plan focused on the Midwest and South could garner broader political support. It addresses national affordability concerns while directing federal investment and job creation to a wider range of states. This can be more viable than attempting large-scale construction in expensive coastal cities, where existing homeowners may resist policies that could affect high property values. In high-cost cities, alternative approaches like increasing wages or encouraging migration may be more practical for improving affordability.
In conclusion, the most effective way to address the housing shortage is to build where costs are lowest. The data indicates that a geographic shift in affordable housing investment is not just about building more units; it's about creating more opportunity. Key recommendations include:
This strategy offers a higher return on public investment and a practical path to homeownership for hundreds of thousands more families.
