In all six High-Growth Metros, recent construction was concentrated among a narrower range of housing types compared to older housing stock. Construction of large multifamily buildings increased, with smaller units making up a larger share of the apartments. On the ownership side, the size of new single-family homes continued to be larger, potentially limiting the availability of smaller, lower-cost homes. These trends illustrate a gap in new supply, where lower-income households—especially families with children—are likely left with fewer housing options that meet their needs.

As these higher-growth metropolitan areas added new supply, lower-income households without a rental subsidy faced larger rent increases than higher-income households in 5 of the 6 High-Growth Metros. …. Some housing experts argue that as areas add new market-rate supply, housing units will “filter down,” becoming more affordable to lower-income households over time. However, some evidence shows that this process has stalled or reversed.

Part of the appeal of the deregulationist narrative is that it suggests we can achieve affordability without major changes to labor market structure or significant public investment in the housing sector.

In San Francisco, where observers often lament regulation-induced supply restriction as the cause of the dramatic increase in housing costs—600 percent in mean rent over the 1980–2019 period—mean income has increased by the same amount. The affordability crisis is particularly dramatic in San Francisco because income inequality has widened much more than elsewhere. The wage incomes of the college educated grew 475 percent while those of the noncollege-educated grew 255 percent, more than double the national increase in inequality.

The deregulationist view of our housing crisis, and the academic literature upon which it stands, fails to account for key conditions that structure today’s housing affordability crisis. It harkens back to a mid-20th century America in which housing was more affordable, but ignores how this period was marked by a fundamentally different distribution of income, and different spatial sorting patterns of people and jobs.

Recent research on option value demonstrates that developers often delay construction in anticipation of higher future returns, particularly when they expect demand to grow. Ironically, regulations might actually increase housing supply if they reduce developers’ expectations about future profits, prompting them to build sooner rather than wait.

[Flo Crivello, @Altimor] Americans severely underestimate how dirt poor most Europeans are. They go spend their American wages there and are amazed at the "quality of life," not realizing that they're taking the equivalent of a trip to Disneyland, and everyone around them is the staff.

[Scott Lincicome @scottlincicome] Median size of a dwelling in every US state vs the same thing in Europe. [presumably a map or chart]

“As culture shaped us as a single species so too it shapes us as separate individuals. This … is what we have in common. Oddly enough, many of our subjects seem to realize this more clearly than we anthropologists ourselves. In Java, for example, the people quite flatly say, “To be human is to be Javanese.”

Don't necessarily disagree with this framing (would say it differently), but I believe a large percentage of Europeans would swap their tiny apartment three miles from downtown Brussels, or Marseille, their tiny car, for a ranch house in Jacksonville beach with three cars & a yard for the kids to play in. Not sure many Americans would take up the opposite offer, other than grad students wanting a quaint experience Maybe I'm wrong, but that's my sense.

Phoenix is a large grid, of mile-long four-lane sides, with shopping plazas at the corners, and an inside of twisting single-lane roads and simple ranch homes on half-acre plots. Those residential insides are the nice parts, and showing that they’re nice is partly why I’d come to Phoenix: to highlight a version of the American Dream, which, while I might not love and isn’t necessarily “walkable,” is still very appealing to lots of people. It’s what I wrote about last week, when I cautioned that walkability doesn’t necessarily translate into livibility. [https://walkingtheworld.substack.com/p/so-what-makes-a-city-more-walkable ]

The standard view of housing markets holds that the flexibility of local housing supply— shaped by factors like geography and regulation—strongly affects the response of house prices, house quantities and population to rising housing demand. However, from 2000 to 2020, we find that higher income growth predicts the same growth in house prices, housing quantity, and population regardless of a city’s estimated housing supply elasticity. We find the same pattern when we expand the sample to 1980 to 2020, use different elasticity measures, and when we instrument for local housing demand. Using a general demand-and-supply framework, we show that our findings imply that constrained housing supply is relatively unimportant in explaining differences in rising house prices among U.S. cities. These results challenge the prevailing view of local housing and labor markets and suggest that easing housing supply constraints may not yield the anticipated improvements in housing affordability.

realistic, economically-informed targets. Even more important, they need realistic, economically-informed tools with which they can quickly & easily gauge a rezoning plan’s sufficiency….It makes no sense to tell city planners to devise their own models, as the planners have neither the technical knowledge nor the political incentives to come up with something reasonable. End the guessing games. Please.

It is recognized that the total housing needs…may exceed available resources and the community’s ability to satisfy this need…. Under these circumstances, the quantified objectives need not be identical to the identified existing housing needs, but should establish the maximum number of housing units that can be constructed, rehabilitated, and conserved over a five-year time frame. [California Government Code, Section 65583(b)(2)]

It is the intent of the Legislature that cities, counties, and cities and counties should undertake all necessary actions to encourage, promote, and facilitate the development of housing to accommodate the entire regional housing need, and reasonable actions should be taken by local and regional governments to ensure that future housing production meet, at a minimum, the regional housing need established for planning purposes. [California Government Code, Section 65584(a)(2)]

When establishing realistic unit capacity calculations, the jurisdiction must consider existing development trends of existing or approved residential developments at a similar affordability level in that jurisdiction, as well as the cumulative impact of standards such as maximum lot coverage, height, open space, parking, and FARs. The capacity methodology must be adjusted to account for any limitation as a result of availability and accessibility of sufficient water, sewer, and dry utilities. For non-residential zoned sites (i.e. mixed-use areas or commercial sites that allow residential development), the capacity methodology must account for the likelihood of residential development on these sites.

magical thinking about [the] “pipeline” of entitled but mostly stalled, b/c infeasible or needing massive infrastructure) projects to whittle the 82,000-unit target down to 36,0900 units that would be accommodated w/upzoning….Their target was suspect & definitely not reviewed by economists.

[T]his model makes a number of key assumptions: that the economic environment looks like 2016, that statistical associations of the past will hold for hypothetical rezonings, and that projects will be built quite close to their maximum feasible capacity.

would be for states to base targets on a committee of economists’ rough judgment of economic feasibility. The feasibility determination could be grounded on rates of housing-stock growth achieved by fast-growing metros elsewhere in the nation, or estimates of the number of units that would have been built in the absence of local land-use restrictions, or estimates of the number of units that would be feasible to build today in the absence of local land-use restrictions, given prices, and construction costs.

[h]omebuilding is not a short-run production decision. It is an investment decision that responds positively to rising prices. In the ordinary course of events, rising demand and prices trigger new construction: higher prices and higher quantities are seen going hand in hand. In economic terms, of course, this is an increase not in supply but of the quantity supplied in response to an increase in demand.

As noted, we have decided to ignore the housing demand component of the housing prices. Two reasons underpin this decision. First, housing demand has been studied much more extensively than housing supply. A distinguished literature, including Alonso (1964), Muth (1969), Rosen (1979), and Roback (1982), has considered the determinants of housing demand. Labor market demand and consumption amenities, such as weather and schools, are both important causes of particular demand for some areas. We have little to add to these findings. Second, policy responses to housing prices are unlikely to change housing demand. Increasing supply is a much more natural policy response to high housing prices than is reducing demand.

In lightly regulated housing markets with growing population and economies, like Atlanta, the supply curve for housing is relatively flat. Thus, as demand for housing expands over time, the result is that competition in the home building industry holds the price of housing reasonably close to its minimum production cost. In heavily regulated housing markets with growing economies, like the San Francisco Bay area, the supply curve for housing slopes up. As a result, additional demand for housing translates into prices that are substantially above the minimum profitable production cost, with rising land values driving up total costs. Finally, in a housing market like Detroit where the demand for housing declined sharply over time, the supply curve for housing has a kink at the existing level of housing because housing is durable and does not diminish quickly when demand falls. As a result, a reduction in demand leads to lower prices for housing and minimal new construction. (4)