By Steven Pearlstein
Friday, July 20, 2007

Mayor Adrian Fenty began making good this week on one of his signature campaign promises, proposing to spend $117 million a year to create or preserve 10,000 units of affordable housing. To make it work, Fenty would provide city-owned land at a discount to developers who promise to set aside 30 percent of the units for households with incomes between $20,000 and $75,000. He'd also dedicate 10 cents of the commercial property tax rate for rental discounts and other subsidies.

In the past, people have looked on these kinds of initiatives in the same category as food stamps or Medicaid: social programs necessary to assist the working poor, or as anti-gentrification measures to complement other initiatives like "inclusionary zoning," by which the District requires that 8 percent of all units in new housing projects be moderately priced.

In the suburbs, the tendency is to downplay the welfare aspect by calling it "workforce housing" for firefighters and teachers who cannot afford to live in the communities they serve. Alexandria and Fairfax County finance their efforts by dedicating a penny of the property tax rate.

These initiatives are fine as far as they go. But in many ways, they are an exercise in shoveling sand against a rapidly rising tide of real estate values that threatens economic growth in the Washington region. For unless we can figure out some way to increase the supply of housing and begin moderating the cost, Washington is in real danger of pricing itself out of the market for new jobs, forcing companies and even government agencies to channel their growth somewhere else.

The fundamental challenge facing the Washington region's economy is that we can't increase the housing stock the way have for the past 60 years, by simply expanding out from the center. The commutes have simply become unacceptable. Yet those who already live here have shown time and again that they are not willing to tax themselves any further to pay for new roads or better public transit. Instead, they've simply opted not to make things any worse by using the zoning and planning process to limit further housing growth.

The rising house prices we've experienced over the past decade are a measure of how much demand has outstripped this constrained supply. And now those near-record prices are seriously beginning to affect the ability of employers to recruit the new people they need to the area.

I'm not just talking about lower-paying jobs; that need has been generally met with immigrant workers willing to drive longer and live in more cramped quarters. But these days, nearly any executive will tell you about the difficulty of recruiting highly paid executives, lawyers, programmers and other professionals. Too often, recruits are excited about the job opportunities here and like the quality of life but turn down offers because they can't afford the houses they want and won't accept the commutes to the houses they can afford.

This isn't a problem for Fairfax or Montgomery counties, or the District -- it is a regional problem. Companies draw their workers from a regional labor market, not a local one, while workers look for suitable housing anywhere in the region. What that means is that a shortage of employees or housing anywhere in the region creates a shortage everywhere.

The increasingly regional and interdependent nature of the economy has other implications.

Take transportation. If people have to travel all around the region to get to work or do business, then a bottleneck anywhere is a bottleneck everywhere.

And if the public schools in the District or Prince George's County aren't producing graduates prepared to fill the entry-level jobs in the Washington economy, that is a problem not just for those places, but also for employers in Alexandria and Silver Spring who have to fill those positions with people from outside the region.

My point is that if most of the really interesting and important problems in the Washington area are regional ones, it only stands to reason that they require regional solutions.

Which brings me back to Mayor Fenty and his affordable-housing initiative. As laudable as it may be, can such an initiative do much to solve the affordable-housing problem in the District if most of the other jurisdictions in the region are limiting growth of housing of all types, driving up real estate prices throughout the region?

Does it accomplish anything if, to finance this new "affordable housing," you impose fees or obligations that only drive up even further the price of housing?

And if, by solving its own affordable-housing shortage, the District winds up attracting working families from other jurisdictions -- or, even worse, encouraging those jurisdictions to do nothing about low-cost housing -- is that good for the District?

I don't raise these questions to suggest that the District throw up its hands and do nothing, or that the problem best be left to the markets. Quite the opposite. What I am suggesting is that the housing problem -- like the transportation problem and the public hospital problem and the problem of workforce training-- will only be solved by collaboration among all the governments in the region.

I can't say how such a collaboration would work. But it would likely begin with the regular meetings among the mayor and the top elected officials of the major counties, staffed by the existing Council of Governments, with regular appearances by the governors of Maryland and Virginia. And if experience elsewhere is any guide, it would have to involve the active support of a business community finally willing to ignore political boundaries and narrow industry interests, and throw its weight around for the good of the regional economy.

Any takers?

Steven Pearlstein can be reached atpearlsteins@washingtonpost.com.