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>> people are having to rent versus the desire to buy. >> for growing cities like washington, d.c. an increase in affluent young professionals is driving up prices. >> you have more millennials coming into the area. the jobs are here. so that the demand for hire

quality apartment brings a higher cost to living here. >> washington, d.c. is the fourth expensive city, and the city has swelled by 25% in the last ten years. primarily new young residents who typically rent on the very same street oh two miles south rising rent is changing lives. >> it's heartbreaking. >> reporter: kimberly is a long-term resident of a building called heritage at shaw. it used to be lincoln west west moreland, and was run by section 8 housing program. drugs, prostitutes, gangs. >> the crime was really bad, so many shootings that was going

on. yeah, we stayed in the worst part of it. >> earlier this year private companies that owned the building opted out of the city's partnership. now it's renovating the units one by one and is charge high marketplace rents. it's only a matter of time until her family's public housing voucher won't be accepted, and she will have to find somewhere else to live. the voucher covers two-thirds of the rent which can fluctuate depending on how much she makes each month. >> we might have to move. we should be able to reap the benefits as well, enjoy the new building instead of being pushed out. >> reporter: the economi housint is an economic squeeze play leaving both sides of the street with hard choices. >> americans are struggling to pay rent across the country. but each community faces unique

challenges. that's why state and local officials are often at the forefront at efforts to find solutions. joining me now to discuss rental policy is director of the washington, d.c. office of planning, and for a long time people were fleeing washington, d.c. now they're pouring in, but it creates a new set of challenges. >> it does set a new set of challenges. we're moving generations of five decades. our rate of growth is astonishing to us. 1100 people a month additional to the city. >> if the land was just sitting there waiting to be developed would people come in without incentives, without tax breaks, without the things that intervene in the market, would developers come in and build large numbers of units that the median d.c. family can afford to live in? >> probably not. probably not. i mean, it depends on where in

the city they would be doing the building and what the cost of the land is as you know we're really land-locked city, prices are high just because of the land. but there are lots of things that we can and do do to produce rental housing that is affordable. >> does the law of unintended consequences set in at some point if you give people forgiveness on their taxes for years to come, or enroll them in some kind of program that creates incentives for them to build, do you also end up foregoing money that you need down the road. create distortions in the market in other ways? >> that might be the case although i think for us we have a big goal for the city of it being an inclusive place for everyone who wants to be here. everyone who wants to stay here, we want to try to keep them. that means working on a lot of fronts in living and staying in

the district of columbia. >> places that had become low income areas are shockingly rapidly becoming high income areas. where do those people employ and how do you convince them to stay in the city if it's in their interest to do so. >> a lot of household who is own their homes, they might have had a house for generations, and when the patriarch or matriarch dies, it turns over. it does not enable any one of those heirs to buy a house in the city. so that's part of what is happening. we do have a lot of new development of housing that's going on. a real boom in multi family, and a lot of that multi family going

forward is going to be producing affordable units through our inclusionary zoning requirement. >> what is a healthy housing market for a mid size american city like washington, d.c. look like. >> even that definition is changing. we want a balance of supply and demand at every level of income. at 30% of median family income at 505%, at 80%, at 120% and higher. so producing housing that meets the market demand is an objective i think in every city. >> if rents continue to go higher and the district continues to attract hig high-we workers can the city be at peace being where people live and watching lower income people migrate to other parts of the metropolitan area? >> this is an issue that is not

just affecting the district of columbia, it's effecting all other places. you probably noticed we had a real boon in transit investment. when you investment in transit, it's a scarcity in our country and our region, it cause its property to go up. jurisdictions that had never done any subsidy are looking at subsidized house to go put controls in place and invest in transit because they want to keep moderate income households with that great access to the regional job market and with the low cost form for transportation. they won't need to own their cars and meet their daily needs. >> when you're help to go run a desirable place to live, it must be easier than when people were rushing for the exits. >> that's a true statement. >> thanks for joining us. >> my pleasure. >> we're going to take a short break. when we come back we're going to talk more about jobs and housing

and why you can't necessarily move your way out of your rent problem. this is inside story. here is more. >> beneath the fluorescentsun in a former meat packing plant is the latest trim in farming. they call it "vertical farming." these fields grow on floors on at industrial park and farmer john adel and his staff agrees

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>> we're discussing joining us. the national low income housing coalition. from massachusetts, managing director of harvard's joint center for housing studies. evolving markets and needs. mark, search fellow at the competitive enterprises. just before the break we heard head of planning for the district of columbia talking about the difficult balance you have between intervening in the market and not intervening in the market. if left to their own devices, if there were market interventions

would housing developers build enough unit it's for people to rent. >> that's an interesting question, and i would say the market is better able to provide these housing unites than say a government program. but she's right. there is a balance i think you need to address these equity issues on the demand side. if people cannot afford, to gain access to these rental units, you may want to have housing choice couchers. the main problem is on the supply side. we have land use regulations in place, and it's restricting the development of new rental housing. i think that should be addressed in earnest across the country. >> sheila, if there are so many families working families making a decent wage at the middle of the middle class how come there aren't enough units to house them that they can afford to pay

to live in? >> well, i think that's the classic example of a market failure. there is a huge pent-up demand for rental housing. we only have to look at the size of the waiting list for housing vouchers videos the country. they're years long for people to get housing assistance. the cost of building and operating housing is more than people earn, more than people can afford base on what they earn in the low-wage workforce. as ages are stagnating or going down, the cost of housing is going up, and there is a disconnect. you can in fact improve the way it is that local governments respond to that by reducing the cost of the process of

development. but at the end of the day there is not enough money out there right now to be able to build and subsidize the housing for the number of people that need it, and of course new harvard report bears that out in great detail. >> erik, what happens? the average american family was taking homeless year after year, why didn't rents come down, too? >> there are two very different markets. the markets for labor is one market. the other market has to do with the value of land increases, which reflects a lot of things. it reflects the value that people ascribed to the school system that people buy into when they choose a location. it reflects public services and providing those things and it reflects just the costs of construction, the costs of servicing debt, utility costs, all those things have been going

up. when you look at it on an inflation adjustment basis over the last 10, 11 years rents have gone up, that's where those markets are driving. where wages inflation, median waging have been falling significantly. you have this growing gap between what people are able to pay, and what the cost of just the basic modest unit would take to rent. when you talk to someone like sheila, her organization puts out information on what wage you would need to be able to afford a modest, just a modest two bedroom apartment around the country. and no place could you do it for the minimum wage which is $7.25 an hour. even in most states it's $10 an hour you need to be able to afford the represen rent and ut,

and in higher cost states it's $20. you're not going to be able to stop that except to bring on to the market more and more smaller units, build to higher densities so there is relief on the pressure on rents that come from just tightness beyond the inflationary costs of building and operating. >> erik belsky joins us from harvard university. we'll take a short break. when we continue we'll talk about what it means to a city or anywhere across america to have a shortage of housing for people who rent rather than buy. this is inside story.

>> welcome back to inside story. and our discussion of housing and specifically rent in our country. it's a complicated story that combines market forces, government policies, jobs, wages and transportation. and mark, i'm wondering if we were to remove a lot of these market interventions and let people live where they could afford, would some of the places that are creating jobs the fastest end up with a shortage of people who could actually live locally and commute to those jobs? >> i think that's--housing affordability, yes, especially when you look at these wealthier areas. new york city, very high cost of metropolitan area. but that is where these high-paying jobs are, and you're absolutely right that housing affordability is directly related to access to jobs. that's certainly a possibility which is why i think you want

to--you want to allow the market to be able to expand supply to meet demand. do that as proficiently as possible because you do. you end up with a situation like manhattan where manhattan condo, 50% of the value could be thought of as land use tax which is problematic for people seeking enter jobs for themselves. >> erik, in the 1960's the cities made a deal with the country, we'll be your warehouses of the poor, and i wonder if we're europeanizing a little bit, residents for very wealthily people and poor people are expected to be beyond the move of the fringes of the metropolitan area to go to work. >> there is no question about it, ray. in many cities across the country you're seeing an increase in demand for living closer to where the jobs are

part of it is driven by rising energy costs. part of it is driven by the fact that a lot of cities over the years have been successful in revitalizing and improve the cultural amenities that everyone wants but those are what the higher incomes are paying for. we're seeing the growth and the share of people living in poverty that are living in suburbs, and the inner ring suburbs, they're being pushed out from some of the inner ring city locations and certainly in a place where i live boston, that's an enormous problem. places that were traditional places where working families could live can't really afford to live there any more. the only hope is to try to address problems in those kinds of neighborhoods is to tie down some that have housing through government programs, and on the other hand relieving some of the local regulations that make it very difficult for the market to respond to very strong demands

in those places to relief some of the pressure on the supply there. you see rents will just go up at the rate of which they would at the result of production costs going up and operating costs going up and landlords that allow rents that go beyond that. >> sheila, what is the argument. we're seeing intensifying rent growth in places like san francisco like the inner core of new york city, close in cities likechlike chicago where they're making a portion of rent for those who aren't making terrific salaries. >> i think for people who are making terrific salaries that it's in their interest to pay attention to what the health of the wider community is because all of us are inter dependent. people who are fixing their

coffee and taking care of your children, and the people who are taking your deposit at the break are all people in this low-wage workforce that any economy depends upon. if you don't have a way for those people to be part of your community and to live affordbly and decency within your community then the larger community is going to suffer. it's very shortsighted not to think about what constitutes a total community and a number of different kinds of people who live there. not to fence th mention the fact people who are elderly and retired, they may have disabilities, they need affordable housing as well. a city that plans only for the high-end people is really missing the mark, an as both a moral and ethical question and a

practical question. oh how do you regulate the jobs that need to be filled in your community in order to keep your community moving. >> can you design policies that allow the market to operate in a coherent way and still takes account of some of the points that sheila makes? >> there are good housing policies and bad housing policies. i mentioned housing choice vouchers as a way to resolve this where you have a check, and then you can gain access to the rental market in an open marketplace. when you have certain other programs, whether it's directly providing the direct provision of public housing or even things like the low income housing tax credit, you don't take into account the low income housing credit, for instance, it's a blanket national thing. it doesn't take into account there are housing needs in manhattan that are different than those in say houston in

affordable areas. so i think letting the markets work and then certainly giving subsidies directly to the people who need this housing directly, i think its better than having a large bureaucratic system that will dole out oh money and decide where resources are allocated. >> thank you so much, happy new year. this brings us to this edition of "inside story." thank you for with us. the program may be over but the conversation continues. we want to hear from you about the issues on this or any day's shows. you can log on to facebook page or send us your thoughts on twitter. you can reach me directly @ray suarez news. from washington, i'm ray suarez.

>> we can pass those those savings on. >> welcome hugh jackman. >> having low prices drives traffic to our shores. >> please welcome john legend. >> which allow us to lower expenses and lower prices again. >> please welcome tom cruise.