They say two out of three ain’t bad.
Josh Lehner of the Oregon Office of Economic Analysis has published a blog post proposing a theory called the “housing trilemma.” According to Lehner, every city strives to achieve a high quality of life for its citizens, a strong overall economy, and affordable housing. But according to Lehner, while a city can achieve two out of three of these qualities, it can rarely succeed in all three – hence, the “trilemma.”
Look at it like a Venn diagram
To prove his point, Lehner analyzed the largest 100 metropolitan areas, rating them on a number of different criteria.
His work can viewed as a Venn diagram, showing that only a small handful of cities land in the overlap between high quality of life, strong economy, and housing affordability.
For example, Seattle is economically strong and has a high quality of life, but housing prices are startlingly expensive. Portland and San Francisco are much the same. You might have better luck affording housing in Cincinnati, Ohio, which also has a high quality of life, but alas, a floundering economy. Houston, Texas, on the other hand, is both affordable and has a strong economy, but you won’t find its citizens boasting about their quality of life.
What about the outliers?
A few sad cases, such as Detroit, only achieve one of the three parts of the trilemma. Housing in Detroit can be snatched up for record-low prices, but that’s only because the economy is tanking and quality of life is low.
The only cities that seem to somewhat achieve all aspects of the trilemma are Oklahoma City, Omaha, and Des Moines.
It’s all about demand and supply
The trilemma makes sense because, as people flock to cities that are known for having economic opportunities and a high quality of life, the increased demand for housing makes rents and property prices spike. On the flip side, towns with few economic opportunities attract fewer new residents, leaving landlords and real estate agents with no choice but to keep price tags diminutive.
Lehner says that popular, thriving cities can become “victims of their own success” if resident populations get priced out of the housing market.
He recommends not only increasing construction on housing, but also providing assistance programs for young home owners and renters; only such programs can “offset the premium required to live in a popular place.”
#HousingTrilemma
