Source: Intelligencer —
The United States is very good at sabotaging itself through policy errors. But few of our nation’s governing failures are as simultaneously needless and detrimental as our inability to build housing.
There are between 1.5 million and 6 million fewer homes in the U.S. than there are households ready to occupy them. The proximate cause of this mismatch isn’t hard to discern: Over the past ten years, the number of housing units per 1,000 people in the U.S. has actually fallen.
By itself, a rising ratio of people to units would be sufficient to put pressure on housing supply. But since the pandemic, the number of discrete households in the U.S. has also spiked. This phenomenon has multiple causes. One is that much of the millennial generation is aging out of its roommate-tolerating years en masse and starting separate households.
Another is that the rise of remote work has led many Americans to seek more personal floor space, whether by ditching roommates or upgrading from, say, one-bedroom dwellings to two-bedroom ones so as to make room for a home office.
In any case, the upshot of this development is that demand for housing has been rising even faster than population growth would predict. After all, every time a pair of roommates split up and get their own places, they remove one dwelling from the market. And every time a remote worker converts a bedroom into an office, the number of people America’s housing stock can comfortably shelter declines by (at least) one.
It’s not surprising, then, that the average rent in the U.S. has increased by 18 percent over the past five years, far outpacing inflation.
The direct impacts of this housing shortage are many and malign. High housing costs have been displacing households from their longtime neighborhoods and driving more than a half-million Americans into homelessness. Housing scarcity also magnifies inequalities, as Americans who happened to buy a home in a high-demand area decades ago reap windfall wealth gains, while younger, less affluent Americans find themselves locked out of homeownership by high prices and unable to build up their savings due to high rents.
Yet the scale of our folly only becomes clear when the second-order effects of the housing crisis are brought into view. The most productive and economically vibrant parts of the U.S. are also the places where housing supply has lagged most egregiously behind demand. This substantially depresses productivity and economic growth throughout the American economy, as workers who would otherwise secure higher wages by migrating to more productive cities forgo such moves since relocating would increase their housing costs more than their pay.
According to one 2019 study from economists at the University of Chicago and UC Berkeley, if New York City, San Jose, and San Francisco loosened zoning restrictions that forbid high-density housing construction, America’s total gross domestic product would increase by 9 percent. Put differently, average annual earnings in the U.S. would rise by roughly $8,755.
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