There Is No Housing Affordability Without Building More Housing

American cities are facing a housing affordability crisis because they are experiencing a housing shortage. If we make it easier to build dense housing in these cities, then the resulting supply boost will ease the cost burden on renters and put homeownership within closer reach for millions of households. Pro-housing policies that do things like eliminate restrictive zoning and streamline permitting won’t eradicate homelessness or end the cost-of-living crisis on their own, but they would constitute a large and necessary step in the right direction.

This is the basic analysis of the YIMBY (“Yes in My Backyard”) movement, and it is supported by a large and growing body of empirical evidence. But as YIMBYism has become more politically successful, and as the empirical evidence in its favor has mounted, the demand among anti-YIMBYs for academic literature that appears to support their position has only intensified.

Recent Research from Supply Skeptics

In January alone, two separate teams of researchers rushed to the anti-YIMBYs’ aid. The first group issued a paper published by the London School of Economics (LSE) titled “Inequality, Not Regulation, Drives America’s Housing Affordability Crisis.” The second, a team of researchers based at Georgetown Law School, asked a rhetorical question in their paper’s title: “Abundance for Who?” They argued that market-rate housing production does not help low-income households, because newer market-rate units tend to be more expensive than older housing and targeted toward higher-income renters.

These papers received uncritical write-ups from the Washington Post and New York Times, respectively. They are undoubtedly going to enter the permanent rotation of literature that anti-YIMBYs selectively cite to “prove” that building more market-rate housing won’t help low-income renters. But like so many papers in that rotation, both of these latest specimens are fatally flawed. Neither one represents a serious challenge to the pro-YIMBY consensus.

Responding to “Abundance for Who?” (Georgetown Law School)

The problems with the Georgetown paper are more obvious, so let’s start there. The authors note that low-income households in cities with relatively high rates of housing construction (for example, Houston) still saw their rents go up. But, as researcher Ed Mendoza observes, the report offers no counterfactual: It fails to consider what would have happened to low-income Houstonians if the city built new homes at the rate of a low-growth jurisdiction like, say, San Francisco. It is likely that rents in relatively high-growth cities would have risen by significantly more if they had not added new housing at an above-average clip.

Second, the paper’s authors simply wave away the mechanism by which new market-rate housing production helps low-income households. Of course a new apartment is going to have higher rent, for the same reason that a 2026 Toyota Corolla costs more than a used 2006 Corolla. But adding new housing allows higher-income renters to “trade up,” which in turn makes their former domiciles available for occupancy. This creates what researchers call a “chain of moves,” which is a bit like a game of musical chairs in reverse: As more chairs get added to the circle, the competition for a seat becomes less and less intense.

The Georgetown paper does not engage with any of the research on chains of moves. The authors do discuss the possibility that older housing can “filter down,” or become more affordable, as it depreciates, but they conclude that “this process has stalled or reversed” without considering why that might be the case. In fact, older housing in many cities has filtered up precisely because it has become more scarce relative to demand. The Georgetown paper declares that market-rate housing construction hasn’t had the desired effect without considering whether that might be because most high-cost cities are still not building at a fast enough clip to end the supply crunch.

Responding to “Inequality, Not Regulation” (London School of Economics)

At first glance, the LSE paper is more sophisticated, and, therefore, more convincing. By modeling hypothetical housing production scenarios in six high-cost cities, the authors claim to show that “supply restriction is not principally responsible for declining affordability,” and in fact that it could take decades or even more than a century for housing production to make cities like San Francisco and New York become affordable. “The problem lies not in a constrained market but in rising inequality,” the authors conclude.

Given the wealth of empirical data on housing production and costs, the authors’ choice to develop an ideal model instead of observing real-world conditions is a strange one. It starts to look even stranger when one considers the assumptions that go into that model. Consider the authors’ “affordability” threshold: They think that a city should only be considered affordable if the median non-college-educated worker can afford the median rent on a one-bedroom apartment. That’s an extraordinarily high standard for affordability. It is one thing to say that an Angeleno who earns $31,000 a year has a right to decent housing and quite another to say that a city where such workers tend to live with roommates in cheaper-than-the-median apartments should be considered prohibitively expensive.

In short, the best available evidence still supports a YIMBY approach to housing policy. While both of the above papers attempt to challenge that evidence, neither is able to muster a strong case against YIMBYism. The fact remains that boosting supply is a necessary (but not sufficient) condition for making sure everyone in the United States has decent, stable housing. We cannot end the crisis unless we undo the system that produced the housing shortage in the first place.