Nothing Makes Things More Unaffordable Than Affordability Subsidies!


People often make fun of my alma mater (The University of Arizona) by saying that “kids only need to fog a mirror to get in.”

And that makes me so mad b/c it is so misleading.

And, this is why: The kids that could fog a mirror were the smart kids!

No way in hell could I have figured out how to fog a mirror when I was 18… 😊

OK, I shouldn’t make fun too much b/c there was a tragedy when I attended; the library burned down, and all five books were destroyed! And three of them had not been colored in yet! (it was terrible).

In all seriousness, the school was pretty awesome, as I graduated with over 40 extra units b/c I enjoyed my classes so much and rarely missed any; I played intramurals every semester; I never missed the major sporting events; I worked out every day in the rustic gym; and I had a gazillion job offers when I graduated.

I would love to say it was me, but I was hardly alone.

One of my roommates became a CEO of a major software firm; another is currently the CIO of one of America’s largest tech firms; and another is an extremely successful software engineer – and all put me to shame.

It was the school. Despite its reputation, it was a phenomenal learning environment.

And here is my broader point: It was all FREE.

I never wrote a single tuition check. And those that did, wrote very small checks.

Today, in-state tuition is almost $13,000 and out-of-state tuition is close to $40,000.

Yes, there has been inflation and yes the school waives a portion of the tuition for many students, but it is still over five times the cost of tuition when I attended back in the dark ages, far outpacing inflation.

So – what happened?

Financial aid happened.

I know demand for college is way up and state funding is down, but financial aid is a main reason costs have gone through the roof.

So, the current version of my alma mater bears little resemblance to the bare-bones version I attended, as the professors are paid far more; there are far more amenities (gyms, fancy cafeterias, far nicer dorms, rec centers, etc.); and there are far more administrators and services. The only thing that has not changed is the fact that most of the students remain illiterate 😊 (sorry, had to take one last jab).

The availability of so much financial aid enabled colleges to expand their offerings, their salaries and their tuition costs.

Here is an excellent Forbes article that explains all the reasons why college costs have skyrocketed (price collusion and obfuscation is another reason).


ANYWAY – the reason I am prattling on about college costs is b/c there is a huge push to have federal and state governments offer homebuying subsidies to “make housing more affordable.”

Here is a Miami Herald article about a group of Florida Realtors pushing for a state constitutional amendment that earmarks funds for housing affordability subsidies.

And, President Biden is proposing a $15,000 tax credit to help first-time buyers.

These affordability programs will definitely make housing more affordable – for the current crop of buyers (and voters).

BUT – they will also simply make housing that much more expensive for the next crop of buyers, as prices invariably adjust to reflect the infusion of subsidies.

We see this in other areas of the economy too with oil and ag subsidies. And medical costs are far higher too b/c of corporate (3rd party) subsidies.

And, we have seen this for years and years in real estate too as “affordable housing programs” largely inflated the housing market prior to the 2008 meltdown.

And, most significantly, artificially low interest rates that are making housing more affordable in the short run also simply push up prices in the long run.

Hence, most efforts to make housing more affordable with a subsidy of sorts just make housing that much more expensive for buyers one to two years down the road.

So, all of us in the real estate and mortgage industries might be wise to remember that many subsidy programs that could help us get more business now will often just make business a lot tougher in the future.


As most readers know, what would really make housing more affordable would be a significant increase in supply.

And that will require governments to making zoning, permitting and other soft costs much more accommodating and cheaper, and it will also require new, innovative and much cheaper housing designs.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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