Extremely high housing costs have numerous consequences. If people are spending most of their money on housing, they don't have money for other necessities, such as healthcare, retail goods and food. There is also lower morale, and upward mobility is diminished. People need to be motivated by opportunities, they can't just be hanging on by a thread.
When people don't have money for healthcare, they either get Medicaid or end up at medical facilities without insurance. When people are treated without insurance or cash, it drives up healthcare costs. There is also more reliance on other social services.
There's all kinds of indirect effects with something like high housing costs. For example, when people can't have enough money, they're more likely to get things other ways. Retail theft can rise. People might engage in other illegal or corrupt activities. With retail theft, this results in higher costs for numerous reasons. Retailers need more security, things get locked up, stores close, and shrinkage raises prices.
A misconception exists where some people think affordable housing developments will depreciate their property values. When prices are inflated, this could make the issue worse because they have more to lose (depreciation). LIHTC projects may face more pushback or require more expensive design features in order to compete with inflated interests.
Other considerations include consumption, inflation and exports. People don't consume as much when they have less discretionary income. Employers need to pay workers more so they can afford housing and this drives up costs. Rising production costs mean lower exports. Excessive borrowing and predatory lending may also factor in.
When competing in a global economy, people need to be competitive. A major part of this is controlling costs, all kinds of costs: Labor costs, production costs, transportation costs, government spending and taxation, healthcare costs, retail costs, infrastructure costs, etc. All of these things end up in the prices of goods and services sold domestically and exported.
