After Gov. Jon Corzine’s lackluster 2009 state-of-the-state address, New Jersey Republicans -- beleaguered after a long run of stinging defeats -- suddenly perked up. Once considered a serious contender for national office, Corzine is now seen as a miserable failure, and his credentials as former CEO of Goldman Sachs no longer seem quite as impressive. But in order to win back New Jersey, not to mention other heavily urban states, Republicans will need to address the housing affordability crisis.

“Crisis” might sound a little strong, particularly when we’re going through a massive housing collapse, with prices plummeting across the country. Yet even now, housing prices in New Jersey run far ahead of average incomes. The result is that the state is hemorrhaging middle-class families, who can no longer afford to live close to their jobs. And this isn’t just New Jersey’s problem. Across the Northeast and coastal California, broken housing markets are sapping the economic vitality of some of our biggest, densest, most productive regions. In the short term, New Jersey’s loss is, say, North Carolina’s gain. Over the longer term, however, America’s economic edge will erode if we can’t make all our regions into engines of upward mobility.

What is the cause of the affordability crisis? Although high demand for housing should mean a high rate of housing construction, which in turn should keep prices low, New Jersey is one of several states in which high demand runs into severe supply constraints at the local level. For the most part, this is motivated by simple NIMBYism: Homeowners and historic preservationists want to keep their towns construction-free, if only to keep property values high.

As economists Edward L. Glaeser and Joseph Gyourko explain in Rethinking Federal Housing Policy, the home mortgage interest deduction, which is designed to increase the availability of owner-occupied housing, has a perverse effect in supply-constrained regions: Instead of making it easier for people to buy houses, it simply bids up the price. To help ease the problem, Glaeser and Gyourko propose capping the home mortgage interest deduction in supply-constrained counties to $300,000 of mortgage debt rather than $1,000,000. The revenue generated by the lower cap would be given to local governments that allow new construction.

There is a real political risk here. In the short term, affluent homebuyers will feel the pinch of the lower cap. At the same time, however, this measure will put the GOP on the side of those middle-class families who can’t afford decent housing, a large and growing constituency.