It’s perhaps informative to contrast this kind of program with one that has historically been the main mechanism by which the supply of affordable housing has increased. The program I have in mind here isn’t a housing program, but, in my view, it has extremely important effects on the housing market. I’m talking about intra-urban transportation, which can serve to dramatically increase the locations available for development, and thus promote the availability of affordable housing.13 I believe that safe, reliable, affordable and efficient transportation to job locations should be a crucial element in an effective housing policy. Such a program indisputably increases the supply of sites available for development, which is a key way to get the benefits of lower prices to a broader set of families. Indeed, it is clear that cities’ ability to grow and attract new residents requires them to either increase density – essentially meaning taller buildings – or to expand outwards by increasing transportation access. Access to affordable credit is yet another pillar of a policy program that promotes housing affordability. We at the Federal Reserve have long worked to ensure that credit flows equitably and that financial services are available to all U.S. citizens. The Fed’s research on these subjects ranges from the pioneering study of redlining by a team of Boston Fed economists, to a very recent New York Fed study on “banking deserts” that appeared in our Liberty Street Economics blog just last month, as well as ongoing community credit work.
As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.1 The Federal Reserve’s employment objective can be viewed both narrowly and broadly. Narrowly, we focus on the degree of slack or tightness in the labor market. This leads to discussion of many measures of the labor market such as the unemployment rate, the participation rate and the growth of wages. Broadly, the economy’s potential growth rate depends on effectively investing in and taking advantage of all of the resources in the economy – in particular, we need to achieve the full potential of the human capital of all Americans. For the United States to reach its maximum economic potential, all Americans must have the opportunity to reach their potential. The United States has always prided itself on being “the land of opportunity.” Parents hope that their children can achieve more than they did. Over the course of our history, immigrants have journeyed to America in search of a better life, a chance to live the “American Dream.” What defines the American Dream?