Housing affordability is one of the key issues facing contemporary America. According to HUD, 12 million renter and homeowner households paid more then 50 percent of their annual incomes for housing in 1999—and this was at the tail end of one of the strongest economic expansions in history. When a household uses such a disproportionately high percentage of its income for housing, it becomes very difficult to meet the other basic needs of living.

Here’s my question: Doesn’t that fact that we (collectively) are even having a national discussion about affordable housing imply that we believe there are systemic problems in the American capitalist-democratic system that can never be cured? In other words, if laissez-faire capitalism works, then the invisible hand of the market would allocate scarce resources efficiently and all types of housing needs would be met, including affordable housing (because there is a demand for affordable housing). However, this does not happen. Therefore policy, a “band-aid,” becomes necessary to modify the natural behavior of the market.

In short, my assertion is that the mere existence of policy (of any sort) supports the notion that an unrestrained market doesn’t really allocate resources efficiently, or equitably.