New studies explain why housing is so accurate and why it is so difficult to make cheaper

Most Americans – more by 80% In a recent poll by the National Manufacturers Union at home, housing accessibility is a problem in their community. However, despite the widespread agreement that housing is overly expensive, it remains difficult for developers to build the housing needed to increase economic access. Some studies in recent issue From the newspaper of the financial perspectives it has shoved to light what the communities need to do to reduce the housing price and why to do what needs to be done is so difficult.

THE first study It is probably considering the most logical cause of high housing costs – the high building cost. The authors, Brian Potter of the Booth Progress Institute and Chadon, note that building costs represent 60% to 70% of full costs to bring a new home to the market. If the cost of builders has increased over time, then it would not be amazing that housing costs are also increasing.

To track costs, they use housing cost data from Rsmeans, a company that monitors the cost data for the construction industry since the mid -20s^th century. They find that while building costs have exceeded total inflation from the mid -1970s, these expenses generally do bad work to explain housing prices. In a variety of cities at different times, the development of housing prices is significantly higher and sometimes less than the development of building costs. The following table shows the ten cities with the highest divergences of price from the cost of building a five -year period from 2010 to 2024. For example, from 2020 to 2024, housing prices in Miami increased by 8.6% faster than building costs, while Lake Charles increased by 2.8%.

The authors also find that the cost relationship has been weakened over time. This suggests that something besides building costs has an increasing impact on housing prices. They note that such a factor could be regulations that prevent additional supply to high demand areas.

Based on this first study, the Next study by Boaz Abramson of Columbia Business School and Tim Landvoigt of Wharton school appreciates what happens when cities add more offer. They are developing a model to evaluate the impact of different housing prices on income and income and income. They are considering a policy on the part of the demand-housing in terms-and two scenarios on the offer: one that increases the offering on top of the market and one that increases the offering at the bottom of the market.

The results for the subsidy are not what most people would expect. Their model estimates that providing $ 100,000 to buy a home increases prices and aggravates financial access when the offer is unable to meet the additional demand created by the subsidy. They also find that the subsidy also increases rents, as some richer people who are indifferent between renting and market at the highest price enter the rental market and offer rents. The result is that most people end up worse. As they say, “the lesson is that only policies that increase supply (or demand reduction) will make housing more accessible.”

Adding bid to the bottom of the market creates better results than a $ 100,000 subsidy and makes the lower quality home more affordable, but the best policy according to the model adds the bid to the top. Adding bid to the most expensive market end reduces rents and prices throughout the distribution of home quality. This may seem opposite, but it makes sense. When more expensive housing is added to the market, richest people no longer compete with medium and lower incomes for lower quality housing. This reduction in demand for housing in the middle and lower extremities of the market leads to lower prices. As the authors say, “in short, the increase in housing supply in the top section is more effective in reducing the proportions-in-entry-in-section by adding a bid to the lower rental section”.

These modeling effects are consistent with other research showing adding more Housing market interest rates, even expensive housing, improves financial access, allowing the filtering process: when richest people move to a new home, it releases their old house for someone with a slightly less income, which in turn releases their home. This process makes it easy for everyone to afford a home.

Thus, if building more houses makes housing more accessible, and there are many evidence This is what we have to build much more housing. But we are not. The third paper From Chris Elmendorf law professor and political science professors Clayton Nall and Stan Oklobdzija helps explain why.

This study examines the research data to better understand how people think about buying their communities. A joint explanation of why people tend to dislike new growth, including the new housing, is the Homevoter case. The idea is that homeowners who are also voters tend to have many of their wealth tied to their home, which makes them rich in any near growth and their associated suffering – no, circulation, loss of views – that can erode the value of their homes. As a result, they launch new growth to protect their larger asset.

While this story makes sense, the authors find little information about research data. For example, the Homevoter case predicts that homeowners prefer higher housing prices as it increases the value of their assets, while tenants prefer lower prices as they do not benefit from assessment of assets. But in their research, they find that 57% of home owners would prefer prices to decline in the future, not to increase. It is not surprising that 85% of tenants would prefer prices to reduce.

Instead of the Homevoter case, the authors indicate that the real reason people oppose new development is that they do not understand housing markets. Only 35% of respondents correctly predicted that the significant increase in housing supply would reduce housing prices, all other equal. Only 31% predicted that the increase in supply would reduce rents. Even more interesting is that this misunderstanding of its dynamic supply and demand was unique to housing. As shown in the following figure from the document, 86% of respondents correctly predicted how the problems of the car supply chain would affect the prices of used cars, while 59% correctly committed that the best fertilizer would increase crop yields and rates. As the authors put it, “the skepticism of the commission … is discreet in housing.”

This lack of understanding has some consequences. First, voters who want lower prices will be less willing to support policies that increase housing supply, as it is not clear to them that more offer helps. Secondly, since they do not really understand forces at work, they will be more likely to support non -supply ideas to reduce housing prices, such as rent control or direct subsidies. Certainly, authors find that more than 80% of respondents support rental control and subsidies reduced payments, while less than 55% support supply policies such as reduction in minimum parking lot Help reduce Housing prices.

A final impact of not understanding how housing markets work accuses the wrong things. In the document, the authors show that survey respondents were more likely to accuse developers and owners of high housing prices than state or local governments that limit the bid through regulations. This is wrong, but it helps to explain why policies such as rent control are popular: if voters believe that developers and landlords, not supply and demand, control prices, it is not surprising that they want the government to remove this power through policies.

The long journey from these three studies is clear. Building costs are not the main cause of high housing prices in most parts. Instead, the rules and regulations that limit housing supply, such as minimal lot sizes, parking requirements and height limits, are what make housing so accurate. Unfortunately, many people who say they want cheaper housing do not really understand how supply and demand in the housing market work. Supporters for more housing should continue to teach policymakers and voters how housing markets work to overcome this obstacle. Since most people understand how supply and demand in other markets work, this may not be as difficult as it seems. Either way, there is still a lot of work.