Is it that they truly don’t believe it or they don’t want more supply (since that changes their quality of life, neighborhoods, traffic, etc) but still do want lower prices in other ways (like by price caps or other things).
One legitimate reason to not think supply reduces prices is because of big financial companies buying up lots of houses and having effectively free rein to price how they want. It removes the competitive piece. In many areas the new houses are built by a few large home builders doing a few large developments, and the new apartments are owned by a few large corporate owners. That can slow down prices reaching their market value.
Colloquially you can see this in sentiments such as:
"All these developers are building is just expensive new luxury apartments"
And as the study mentions:
> To the extent that ordinary people form loose mental associations between “housing development” and “housing affordability,” they may well associate more development with higher prices rather than greater affordability. New housing, being new, tends to be more expensive than existing, depreciated housing.
It is just a perception bias thing. You don't really "see" everything around you aging because it happens slowly.
You hear this shit all the time from politicians and activists. Somehow high density housing is built for corporate greed and won’t lower prices. It’s self contradictory at it’s base level but is driving the narrative. It’s maddening.
Edit: Here I am getting downvoted by people who don’t have the bravery to confront their own contradictions and realize that their own beliefs are being manipulated to ruin their own lives.
They’ve been building houses in my area non-stop since 2010 or so. Prices haven’t gone down.
There are other factors than supply. But most of the new supply is large houses. If you don’t want 4+ bedrooms and a 2000+ sq. ft. house the supply hasn’t changed much at all.
Single family houses are a premium product and continue to move upmarket. Cheap new construction house has become an oxymoron. Residential construction costs were rising at 5.5% per year before Covid (faster than inflation). If it were legal to build more condos, duplexes, townhomes, and apartments there would be less bidding up of SFHs. More people could live closer in meaning less traffic congestion.
It’s not that I don’t believe adding supply will reduce prices, rather that adding supply alone won’t reduce prices. As the paper gets into, it’s a combination of supply, and homeowner entrenchment, and government policies barring construction or teardowns, of zoning restrictions, but also of Private Equity acquisitions of housing stock and builders, of artificially manipulating supply to keep prices high and promote higher returns for builders or sellers at the expense of buyers.
The problem is that demand for housing is relatively fixed, in that every human needs a shelter, and every human wants a home. That doesn’t change outside of population statistics: in a vacuum, all things being equal, every human would buy a home.
The issue is that the supply side is so heavily gamed by existing players that the entire market is deliberately engineered for maximum extraction of wealth from new buyers to prop up valuations of existing owners and builder/landlord margins.
Relatedly, this is why I’ve stopped fighting each niche front individually and instead focused on the “nuclear option” of mandating affordable housing as a human right. That would open the floodgates to lawsuits against communities, states, and companies that hoard existing stock and bar newer, denser construction. It would add a sorely needed lever of pain to deter hostile housing practices, by threatening things like rent/price controls or forced divestitures unless the supply problem was meaningfully addressed post-haste.
If arguing about this on Facebook has taught me anything, it is that most people definitely do not believe it. They always make the same argument, which is that new housing stock tends to be high priced homes, so if what we need is low price homes why are we building high priced homes? Anybody who understands economics knows why this argument is wrong, but most people don’t.
Nonetheless, I don’t think this has much to do with the public policy as it stands because the people who make the policy do understand this. So while I think the assertion is correct, people do not believe it, I do not think that is a large factor and why the policies restrict housing.
I think that what contributes to this view is that new construction always seems to be at the high end of the market. This makes sense, it doesn't cost the builder a lot more to build a $500k house than to build a $250k house, and building two $250k houses will take twice the time and close to twice the costs. So builders/developers are going to build what is most profitable, which is the most expensive houses that they think they can sell in the local market.
What is less obvious is that this still increase housing supply. It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving their old houses, so eventually the price drops happen on the older, smaller homes at the bottom end of the market.
Private developers aren’t in the business of lowering property prices. And homeowners don’t want that either.
You need to also consider what is being built. NYC has built a lot of ultra-luxury property that really amounts to money laundering and will never increase the supply to ordinary residents.
The private sector will never solve this problem on their own.
If you could build houses for free then obviously adding supply would eventually reduce the price.
But I have been looking at the cost to build a home, it costs even more to build than to buy a used one. Who, exactly, is going to be able to afford to buy the new houses while selling their current home at a lower price than it would currently fetch?
Maybe if AI replaces all the software developers they can flood the home construction market in their quest to find new work and push the price of labor down, thus reducing the cost to build a house, but otherwise...
One thing few people take into account is that demand housing is much, much more elastic than people realize - per capita people are consuming far more square footage than they used to. Houses that were built to be house multiple generations under one roof now only hold one generation. Usually elderly empty nesters. In our area we also see people buying up lots of older duplexes or triplexes and converting them into single-family homes.
So even areas where population is stable, and housing supply increases, it can result in very few tangible gains at the margin.
Central London monthly rent for a 3-bed house is around £3500, but a 1-bed flat rents for £2100. So split the house into two flats and the landlord makes more money.
Hence relaxing zoning restrictions will push prices up.
This is not what the study says, it’s more nuanced. People do not believe that liberalising demand will solve the issue more efficiently than other measures.
Developers build new housing when prices go up generally. Therefore when people see new housing they see higher prices in their regional market. So although folks may mix up causality, the observation is quite rationale.
The housing market is different than most markets in many ways.
- Building cost is often marginal compared to land.
- Land value is highly correlated to economic opportunities around it.
- Economic opportunities are following a power law around economic centers (highly non-linear).
- There is a density ceiling, with some variations depending on cultural traditions but still constrained by transportation technologies and psychological factors.
- The location of economic centers is not randomly distributed but constrained by geography, especially access to water transportation routes.
Financial speculation and building restrictions are second orders effects of the inherent housing scarcity, amplifying it, but not a root cause.
Nowhere in the US does it at the scale to make a serious long-term dent in prices.
Nobody with enough money and exposure to large amounts of real-estate wants to kill the golden goose. Look at the post-Covid-migration build stories. Rents start to soften and development dramatically slows.
You would need continued serious government investment to make sure focus continues to be on total units and consumer price instead of investor ROI.
Because even adding four fancy town-houses or condos helps if what used to be there was single-family or duplex. But it doesn't help NEARLY as much as adding 100 units by converting an old shopping center or 30-unit apartment. But there are strong incentives against developers doing "too much" of the latter if they know they can make the same ROI by selling fewer, nicer units.
Individual residential property owners take a lot of blame here but they're not even benefiting THAT much - every crazy price increase is putting any upgrade to their own situation further out of reach. And fighting low-density residential NIMBY-ism is a slow process if you still only can buy one lot as a time as it becomes available. So focus on underutilized commercial and industrial near major hubs or transit corridors where most of what you're displacing is ugly parking lots and empty storefronts that contribute to crime as well.
Immigration is a similar debate where supply and demand goes out the window for political reasons.
Here in the UK it's really hard to convince people that it's really hard to address our housing shortage through building alone when we bring in about a million people every year. Even a lot of economists seem to think supply/demand doesn't apply when it comes to wages and house prices if you introduce immigration as a variable.
Unless it's undeniable I find people will just believe whatever suites them personally. Which is fair enough. I guess I'm just surprised at how unconscious this bias is for most people. Or at the very least they seem to truly believe that the housing market is an exception to supply/demand dynamics.
Adding supply would only reduce prices if it was added at the average or below.
Even if the number of units increase, the price can actually go up.
The relative market power matters most. A developer with cheap bridge financing and a large portfolio of unsold units has every incentive to hold prices to set expectations, while buyers who are occupiers generally are compelled to buy in a certain time frame and location.
In the cost to build vs what would be affordable I think people on both sides over generalize.
Liberal land use and other rules would eventually bring down prices to affordable levels for most families. But not all of them. Every country has to have some strategy to provide housing for the bottom of the income range, since they typically won't be able to afford "dignified" housing based purely on the Capex/depreciation/opex value of the housing (they will always be renters).
So you need something like liberal land use to provide for 80%, and then some kind of government intervention for the bottom 20% (numbers will vary based on the location/nation/etc)
>Why is housing supply so severely restricted in US cities and suburbs? Urban economists offer two primary hypotheses: homeowner self-interest and political fragmentation. Homeowners, who outnumber and have organizational advantages over renters, are said to lobby against development to protect their property values. The fragmentation hypothesis emphasizes that development's negative externalities are borne locally while most of the benefits accrue regionally or nationally, leading localities to block housing.
These two hypotheses sound like the same thing to me. Homeowners organize to protect themselves from negative externalities that affect their property values (and quality of life).
35 comments
[ 3.4 ms ] story [ 44.0 ms ] threadOne legitimate reason to not think supply reduces prices is because of big financial companies buying up lots of houses and having effectively free rein to price how they want. It removes the competitive piece. In many areas the new houses are built by a few large home builders doing a few large developments, and the new apartments are owned by a few large corporate owners. That can slow down prices reaching their market value.
"All these developers are building is just expensive new luxury apartments"
And as the study mentions:
> To the extent that ordinary people form loose mental associations between “housing development” and “housing affordability,” they may well associate more development with higher prices rather than greater affordability. New housing, being new, tends to be more expensive than existing, depreciated housing.
It is just a perception bias thing. You don't really "see" everything around you aging because it happens slowly.
Edit: Here I am getting downvoted by people who don’t have the bravery to confront their own contradictions and realize that their own beliefs are being manipulated to ruin their own lives.
They’ve been building houses in my area non-stop since 2010 or so. Prices haven’t gone down.
There are other factors than supply. But most of the new supply is large houses. If you don’t want 4+ bedrooms and a 2000+ sq. ft. house the supply hasn’t changed much at all.
The problem is that demand for housing is relatively fixed, in that every human needs a shelter, and every human wants a home. That doesn’t change outside of population statistics: in a vacuum, all things being equal, every human would buy a home.
The issue is that the supply side is so heavily gamed by existing players that the entire market is deliberately engineered for maximum extraction of wealth from new buyers to prop up valuations of existing owners and builder/landlord margins.
Relatedly, this is why I’ve stopped fighting each niche front individually and instead focused on the “nuclear option” of mandating affordable housing as a human right. That would open the floodgates to lawsuits against communities, states, and companies that hoard existing stock and bar newer, denser construction. It would add a sorely needed lever of pain to deter hostile housing practices, by threatening things like rent/price controls or forced divestitures unless the supply problem was meaningfully addressed post-haste.
Nonetheless, I don’t think this has much to do with the public policy as it stands because the people who make the policy do understand this. So while I think the assertion is correct, people do not believe it, I do not think that is a large factor and why the policies restrict housing.
What is less obvious is that this still increase housing supply. It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving their old houses, so eventually the price drops happen on the older, smaller homes at the bottom end of the market.
You need to also consider what is being built. NYC has built a lot of ultra-luxury property that really amounts to money laundering and will never increase the supply to ordinary residents.
The private sector will never solve this problem on their own.
But I have been looking at the cost to build a home, it costs even more to build than to buy a used one. Who, exactly, is going to be able to afford to buy the new houses while selling their current home at a lower price than it would currently fetch?
Maybe if AI replaces all the software developers they can flood the home construction market in their quest to find new work and push the price of labor down, thus reducing the cost to build a house, but otherwise...
If you build houses, they’ll just buy them and rent them out for profit.
So even areas where population is stable, and housing supply increases, it can result in very few tangible gains at the margin.
Central London monthly rent for a 3-bed house is around £3500, but a 1-bed flat rents for £2100. So split the house into two flats and the landlord makes more money.
Hence relaxing zoning restrictions will push prices up.
interesting video :
https://www.youtube.com/watch?v=lH8_4AiIxeo
- Building cost is often marginal compared to land.
- Land value is highly correlated to economic opportunities around it.
- Economic opportunities are following a power law around economic centers (highly non-linear).
- There is a density ceiling, with some variations depending on cultural traditions but still constrained by transportation technologies and psychological factors.
- The location of economic centers is not randomly distributed but constrained by geography, especially access to water transportation routes.
Financial speculation and building restrictions are second orders effects of the inherent housing scarcity, amplifying it, but not a root cause.
Nobody with enough money and exposure to large amounts of real-estate wants to kill the golden goose. Look at the post-Covid-migration build stories. Rents start to soften and development dramatically slows.
Like Austin - https://austinmonitor.com/stories/2024/08/as-construction-sl...
Or Denver - https://www.denverpost.com/2025/07/24/apartments-housing-rea...
You would need continued serious government investment to make sure focus continues to be on total units and consumer price instead of investor ROI.
Because even adding four fancy town-houses or condos helps if what used to be there was single-family or duplex. But it doesn't help NEARLY as much as adding 100 units by converting an old shopping center or 30-unit apartment. But there are strong incentives against developers doing "too much" of the latter if they know they can make the same ROI by selling fewer, nicer units.
Individual residential property owners take a lot of blame here but they're not even benefiting THAT much - every crazy price increase is putting any upgrade to their own situation further out of reach. And fighting low-density residential NIMBY-ism is a slow process if you still only can buy one lot as a time as it becomes available. So focus on underutilized commercial and industrial near major hubs or transit corridors where most of what you're displacing is ugly parking lots and empty storefronts that contribute to crime as well.
Here in the UK it's really hard to convince people that it's really hard to address our housing shortage through building alone when we bring in about a million people every year. Even a lot of economists seem to think supply/demand doesn't apply when it comes to wages and house prices if you introduce immigration as a variable.
Unless it's undeniable I find people will just believe whatever suites them personally. Which is fair enough. I guess I'm just surprised at how unconscious this bias is for most people. Or at the very least they seem to truly believe that the housing market is an exception to supply/demand dynamics.
Even if the number of units increase, the price can actually go up.
The relative market power matters most. A developer with cheap bridge financing and a large portfolio of unsold units has every incentive to hold prices to set expectations, while buyers who are occupiers generally are compelled to buy in a certain time frame and location.
Liberal land use and other rules would eventually bring down prices to affordable levels for most families. But not all of them. Every country has to have some strategy to provide housing for the bottom of the income range, since they typically won't be able to afford "dignified" housing based purely on the Capex/depreciation/opex value of the housing (they will always be renters).
So you need something like liberal land use to provide for 80%, and then some kind of government intervention for the bottom 20% (numbers will vary based on the location/nation/etc)
These two hypotheses sound like the same thing to me. Homeowners organize to protect themselves from negative externalities that affect their property values (and quality of life).