MNI: Fed's Kashkari: Unaffordable Housing Is An Issue

By Sara Haire

     WASHINGTON (MNI) - Minneapolis Federal Reserve Bank President Neel Kashkari

indicated Monday morning that housing affordability is a key issue, and a lack

of developable land appears to be a main factor.

     "Something in our housing system is structurally broken," Kashkari said at

the U.S. Department of the Interior Tribal-Interior Budget Council Meeting, in

Prior Lake, Minnesota.

     Kashkari acknowledged the Fed's dual mandate of maximum employment and

price stability as being the primary function of the Fed, but also recognized

that the central bank "has been given significant authority as supervisor of

financial institutions."

     Regional Fed banks have responsibilities that rely on understanding the

local economic conditions, Kashkari explained. This understanding of the

different districts is important in trying to navigate monetary policy for an

entire country, which is where the issue of affordable housing comes into play.

--HOUSING IS UNAFFORDABLE

     The median cost for new homes has been rising steadily, and reached an

all-time high at $343,400 in November. Homes that are being resold, also known

as existing home sales have also seen their sale prices rise in the last few

years.

     "[T]oo many barriers impede the supply of land and buildings," Kashkari

said, claiming that to be the only explanation that made sense to him as to why

houses are becoming less affordable.

     Kashkari explained that these barriers have mounted in recent years and

while there have been attempts to work around the issue, this has led to

"additional appropriations for subsidized housing." While Kashkari acknowledged

the benefits from these programs, the number of families struggling with

affordable housing "far exceeds the subsidies" that can be afforded.

     In an effort to no longer work around the issue and bring costs of houses

down, Kashkari said that he and his research staff are attempting to "identify

where we can achieve the biggest net gains through reducing barriers to the

supply of developable land and new homes."

--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com

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