Why the high cost of housing matters more than you think
When we consider the challenges that civilization faces this century, from climate change, to poverty, to depopulation, there is one issue that lies at the core of everything: housing. The global housing crisis is as close as we may ever get to a “theory of everything” for societal ills. That is, if we can solve the challenge of housing everyone affordably, most everything else follows.
Why the Rent is So High
Housing prices are a function of supply and demand. Housing demand is extremely high in prosperous locations with good jobs and opportunity. Unlike most products, however, be it airplanes, cell phones, desks, or cars, the supply of housing has long been unable to meet that demand in much of the Western world and beyond. For this reason, housing prices have become increasingly divorced from the cost of construction.
Why can’t developers meet demand? The single most important cause is overzealous Euclidean zoning regulations that unnecessarily restrict land use, limiting the supply of housing. Zoning separates land by use, preventing the mixing of commercial, residential, and industrial uses.
But what began as a rational means to prevent some negative externalities of development, such as a factory enveloping a neighborhood in smog, has evolved into an instrument of rent-seeking. After World War 2, zoning was no longer limited to merely separating land uses, but expanded into limiting residential density as well, often by mandating low-density single-family homes be built on limited residential land.
Categories: Economics/Class Relations