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How Government-Inflated Housing Costs Contribute To Social Security’s Collapse

By 2049, the national debt will equal 144 percent of GDP. A huge portion of this is due to Social Security costs. So how do we prevent fiscal ruin?


If the Congressional Budget Office’s (CBO) new report is right, by 2049, the national debt will equal 144 percent of gross domestic product, or the total of all goods and services working Americans produce in an entire year. It’s the highest national debt projection in history—largely thanks to Social Security and Medicare spending. It’s a big cost, and young people of today and the future will be left to pick up the tab.

Paying interest on the national debt in the future isn’t the only economic burden young Americans face. Politicians and commentators often point to the immense hurdles we encounter in student loan debtslow wage growth, and the high cost of living. Those problems tend to be considered separately from the national debt, but high housing prices—driven by zoning regulations—also grow the future cost of Social Security.

Older generations, particularly the boomers, have predominantly relied upon spending on homeownership as a reliable way to build wealth and savings over time. That’s exactly why they tend to support public policies that inflate home prices. And it’s part of the reason why many young people can’t afford to buy a home.

Because their net worth is so tied up in the worth of their house, older homeowners tend to push for regulations that make it even harder for younger people to get a house of our own. This includes zoning regulations that prevent the construction of new, tall apartment buildings and housing units. By restricting the housing supply like this, zoning laws artificially increase home values and the net worth of homeowners, often pricing out tenants and potential new residents.

It’s contributing to why millennials are often found living with their parents long after they received their college diplomas. Older homeowners reap the benefits of those heavy regulations, and young people suffer.

Sky-high rents make it harder for young workers to move to cities with better-paying, higher-productivity jobs, and makes having kids even more expensive. We see reduced birth rates among people who would like to have children if they could afford to. Homelessness rates, too, are driven by these strangling housing restrictions.

The problems with zoning regulations don’t end there. They also contribute to higher Social Security spending (which is projected to rise from 4.9 percent of the U.S. economy in 2019 to 6.2 percent in 2049). Let me explain.

To compensate for increases in the cost of living, each year the Social Security Administration (SSA) increases recipients’ benefits by a few percentage points. This cost of living adjustment (COLA) accounts for increases in housing prices—so if housing prices increase, then benefits increase as well.

The SSA’s calculations assume that an increase in housing costs means that seniors are experiencing an increase in rent. But most seniors aren’t renters, they’re homeowners. According to Harvard University’s Joint Center for Housing Studies, 78.7 percent of households older than 65 own a home. So whenever housing prices go up, kicking the young out of the market, the vast majority of retired Americans, who already have accumulated the most generational wealth, just get richer.

As a result, Social Security spending grows faster unnecessarily. According to Andrew Biggs, a resident scholar at the American Enterprise Institute, a COLA that properly measured the housing costs retirees face could “reduce the long-term Social Security deficit by 20 percent.”

So, who is on the hook for this inflated spending? Disproportionately, it’s young people: the same people directly hurt by zoning regulations and high housing costs. For example, the Social Security 2100 Act, which would help stabilize funding for Social Security while expanding its subsidies, includes a significant payroll tax increase of 2.4 percent. This tax would also disproportionately affect workers who are lower-income—a group made up of mostly younger workers.

Reducing the COLA for most retirees, while keeping it the same for lower-income Social Security recipients (who are more likely to be renters), would more accurately represent the cost of living retirees face—while protecting retired renters. Meanwhile, it would reduce the growth of Social Security spending and therefore shrink the national debt burden on young Americans.

Zoning regulations and warped Social Security spending work in tandem to cripple young adults. Our politicians, therefore, should reform zoning laws and reduce COLA benefits—both crucial to creating new housing, lowering costs, and reducing the financial burden on those of us who are just starting out.