America’s historic shortage of affordable housing has been blamed on overregulation by liberal blue states, while conservative red states were seen as incentivizing construction. But a recent economics paper argues that suburban NIMBY opposition—in both red and blue metropolitan areas—is now slowing housing growth across the country.
The National Bureau of Economic Research paper, “America’s Housing Supply Problem: The Closing of the Suburban Frontier?” by top urban economists Edward Glaeser and Joseph Gyourko, takes a close empirical look at Atlanta, Dallas, Miami, and Phoenix—metropolitan areas that “were once building superstars.”
But they find “new housing growth rates have decreased and converged across these and many other metros, and prices have risen where new supply has fallen the most.” They see suburban NIMBYs’ use of restrictive regulations on housing development as a principal culprit, and get similar results when analyzing 44 of America’s largest metro areas, regardless of whether they are blue or red.
Affordable Housing Growth Is Slowing Down
The paper outlines several key trends. First, housing growth rates in “superstar” red state Sunbelt metros have slowed and are now converging with the slower growth rates in older blue state metros. Second, higher home prices aren’t driving building more units, an apparent contradiction to basic economics of supply and demand. And finally, housing construction in denser areas—especially cities that allow multifamily construction—is now outstripping construction in less-dense suburbs, a reversal of previous patterns.
This is a change from our previous narrative about housing, one that still persists politically. Many commentators claim blue states and metro areas restrict housing through too much regulation, while red states favor markets and hold down regulation, resulting in higher housing growth.
But the reality on the ground is quite different—in general, red state metros don’t have more market-oriented zoning than blue state metros.
Red And Blue Places Both Overregulate Housing
In 2018, Gyourko and two co-authors analyzed land-use regulation for “more than 2,450 suburban communities across a wide array of metropolitan areas” to create the Wharton Residential Land Use Regulatory Index.
The conclusion? Although the San Francisco and New York regions were more restrictive, “there is no place (on average) where residential development is simple and quick.” Projects have to be reviewed by multiple and sometimes contradictory regulatory bodies; lot size and other restrictions, including limiting much available land to single-family house construction and wasting land space, are common; and overall, since 2000, “the fundamental nature of the local regulatory environment has not changed much.”
Some people argue that housing construction slows down as we run out of land to build on. This argument is called the “density wall”—we have less housing supply because there’s no more land.
However, land isn’t just physical space—zoning determines whether and how much housing can be built on any piece of land. One key to greater housing availability and affordability is multifamily construction—apartments and condos. But both red and blue jurisdictions have widespread regulatory restrictions, against building them. The New York Times reports that “it is illegal on 75 percent of the residential land in many American cities to build anything other than a detached single-family home.”
Glaeser and Gyourko largely reject the “density wall” hypothesis for the lack of housing supply. High density does have a small impact on construction, but the measured effects “are small and getting smaller” over time. They conclude that “American housing supply is not declining primarily because we are hitting a density wall.”
What about construction costs? While there has been an increase in construction costs since 2000, the authors conclude “high production costs cannot account for the bulk of the constant quality price growth” in many markets. And low productivity in housing production, which means higher costs, “reflects the small scale of projects and businesses, which is in turn the result of either land use regulations or limited land availability,” with the latter itself tied to land use regulation.
Suburban NIMBYs Are Blocking Affordable Housing
In short, America’s housing affordability crisis stems from a pervasive lack of supply and construction. The authors link this to regulatory restrictions, especially in suburbs, in both red and blue states. NIMBY homeowners mobilize a variety of regulatory barriers that prohibit multifamily construction, and that is now stopping adequate housing development across the nation.
To a large extent, this is anchored in America’s distorted and biased metropolitan form—a single metropolitan economy made up of literally hundreds of politically independent governments, especially small suburbs surrounding major central cities. As my 2023 book Unequal Cities describes, the growth of suburbs was fueled by racially and economically exclusionary policies, with government subsidized housing and automobile transportation. Suburbs have prospered by not paying taxes outside of their narrow borders that would support regional schools, housing, and transportation while they benefit from a core city that drives economic growth.
Red And Blue Insiders Stop Affordable Housing But Hurt Us All
Glaeser and Gyourko cite Nobel economics laureate Mancur Olsen on how “insiders use regulations” to protect themselves against market forces “and keep outsiders out.” They see their housing analysis as showing “existing homeowners in high price areas have become better at controlling land use regulations and stopping new construction.”
Housing expert Alex Armlovich of the Niskanen Center sees the problem as “a collective action trap.” Small suburbs with restricted zoning aren’t responsible for the overall metro area, and even if one or two allow more housing, it won’t be enough to offset the many other places that won’t build. So the “regional interest”—having enough affordable housing in the entire region—is “not represented in that local control.”
Can states do something about this restrictive local control? Will cities at the center of metro areas build more housing to offset the lack of suburban supply in the face of continuing regional demand for housing? In my next blog, I’ll take a look at the very mixed record for those two options.
But Glaeser and Gyoruko’s empirical findings are critically important for our housing debate, and policy solutions. We aren’t running out of land, but restricting its use. Construction costs have risen, but not enough to explain the lack of new building. And in a challenge to conventional supply and demand analysis, they find rising prices aren’t encouraging more housing construction, due to widely-shared regulatory restrictions on housing, in red and blue states alike.
They conclude: “If existing homeowners in high price areas have become better at controlling land use regulations and stopping new construction, then we should expect to see a decreasing link between high prices and new construction, which is exactly what the data show.”
Red and blue insiders and home owners have captured the housing market, and our lack of affordable housing is the result. But while the insiders benefit economically, our lack of housing supply hurts home buyers, the economy, and the nation as a whole.