
Frequent commenter RossB recently posted a link to the paper, The Impact of Zoning on Housing Affordability. The title is somewhat of a misdirect because in the opening paragraph it says:
This paper argues that in much of America the price of housing is quite close to the marginal, physical costs of new construction.
The Introduction goes on at some length to emphasis that it is about the cost of housing and not meant to address the issue of poverty. This is key to recognize because it separates the homeless issue from the affordability of housing. As it states on page 4, “To us, a housing affordability crisis means that housing is expensive relative to its fundamental costs of production, not that people are poor.” This is a key concept when related to supply and demand. People who aren’t in the market for a home by definition are not part of demand as it relates to economics. They may want a house, they may need a place to live, but they are not influencing the market price of homes. Or, as they say in the paper, “Hence, we focus on the gap between housing costs and construction costs.”
Continue reading “Construction and zoning vs supply and demand”