Why is it so hard to create affordable housing in large European and US cities, and how can it be fixed?
Cities must build housing like infrastructure — with public finance and long-term planning — because private markets build only for the highest bidders.
Roosevelt shows that direct government construction works when private capital won't build for lower incomes. Thatcher proves that property ownership creates stability, but only after someone builds the housing stock. Lee demonstrates that state development with forced savings can house entire populations affordably. Keynes explains why housing markets cycle between speculation and shortage, requiring patient public investment.
The split is over method, not necessity: direct provision versus deregulated supply versus state development corporations.
Public housing requires direct government provision and finance, not reliance on private markets.
In November 1933, I established the Public Works Administration with a housing division specifically because private markets had demonstrably failed to house American families at prices they could afford. The Housing Act of 1937 created the first federal public housing program — not as charity but as infrastructure investment. We built housing the same way we built dams and bridges: as public works that private capital wouldn't finance but that the nation required. The Federal Housing Administration simultaneously created the mortgage finance system that made homeownership possible for the middle class.
Private developers build for profit, which means they build for those who can pay the highest rents and purchase prices. They cannot and will not build for families whose incomes are too low to generate adequate profit margins. This is not a moral failing — it is economic logic. Public housing serves those the market excludes by design.
Property ownership creates individual responsibility and social stability — housing supply problems result from planning restrictions, not market failures.
Roosevelt's approach created welfare dependency, not genuine housing solutions. In 1980, I introduced Right to Buy — giving council tenants the legal right to purchase their homes at substantial discounts. Two million families bought their council houses. This transformed them from passive recipients of state housing into active stakeholders with a direct interest in their community's prosperity. Property ownership changes behaviour fundamentally — owners maintain what renters neglect.
The real barrier to affordable housing is not market failure but government failure — specifically, planning restrictions that prevent sufficient housing supply. When local authorities restrict land release and impose lengthy approval processes, they create artificial scarcity that drives up prices. Free the land market, streamline planning approval, and housing supply will respond to demand.
Affordable housing requires state-led development with mandatory savings, treating housing as infrastructure rather than commodity.
Thatcher, your Right to Buy worked because Britain already had substantial council housing stock to sell. The fundamental question is who builds that stock initially. In 1960, Singapore faced acute housing shortage — 250,000 people in slums and shophouses. I established the Housing Development Board and made a strategic decision: housing is infrastructure, like ports and airports, not a commodity to be left to market speculation.
The Central Provident Fund — mandatory savings from every paycheck — provided the finance mechanism. Workers contributed 20% of salary, employers matched it, and these funds purchased HDB flats. This wasn't welfare dependency but forced savings converted to asset ownership. By 1990, 87% of Singaporeans lived in government-built housing, and 90% of those owned their flats. The state built the supply; individuals bought the ownership.
Housing markets are subject to speculative bubbles and require government intervention to ensure adequate investment in affordable housing supply.
Lee, your HDB model succeeded because Singapore treated housing as long-term infrastructure investment, not short-term market speculation. Housing markets exhibit precisely the animal spirits I documented in other asset markets — waves of speculative enthusiasm followed by credit contraction that leaves supply inadequate to need. The 1920s Florida land boom and the 2008 subprime crisis demonstrate identical patterns separated by eighty years.
Roosevelt understood this correctly in the 1930s. Housing requires patient capital with social returns that private markets cannot capture — neighbourhood stability, reduced crime, improved health outcomes, educational continuity for children. These benefits accrue to society but not to private developers' balance sheets. Government must therefore ensure adequate investment when private markets underprovide.
The key insight is that housing operates on two different time horizons simultaneously: short-term market cycles driven by credit availability, and long-term demographic need that persists regardless of market conditions. Only public investment can bridge this temporal mismatch reliably.
The convergence note
Where the council converges:
All members accept that private markets alone cannot deliver adequate affordable housing supply in major cities.
Where it divides:
Roosevelt and Keynes argue for direct state provision and finance. Thatcher argues for removing regulatory barriers and enabling private ownership. Lee argues for state-led supply with individual ownership through forced savings.
What only the policymaker can resolve:
Whether to build public housing, deregulate private housing supply, or create state development corporations with mandatory savings mechanisms.