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Rate Hikes and the Housing Crisis

Rate Hikes Negatively Affect Affordable Housing

Higher interest rates are affecting the availability of affordable housing, not just here in Iceland, but also in the Unites States and Europe. In a recent article for The American Prospect, Robert Kuttner, shows how high interest rates only worsen the shortage of affordable housing.

“One of the persistent sources of inflation is the relentless rise in the cost of housing, both rental and owner-occupied. This squeezes the middle class and especially the poor, for whom the supply of so-called affordable housing is grossly inadequate to the need...In major metropolitan areas, median rents are several times what a household can afford based on median incomes. Home ownership is becoming ever further out of reach for all but those with family money to subsidize down payments.”

The solution, as proposed by Robert, is to create a publicly owned public-housing sector along the lines of what is done in Austria and the Netherlands.

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