Recently, two urban planning professors, Kirk McClure at the University of Kansas and Alex Schwartz at the New School, penned an op-ed with the provocative title:

Homes Are Expensive. Building More Won’t Solve the Problem.

In the article, the authors argue, contrary to decades of economic research, that, while there is an affordability crisis, there is no housing shortage in the US. To quote:

However, as real as the housing crisis is, it isn’t caused by a housing shortage. The nation’s overall supply of housing is adequate, and there is little evidence to show that rising housing costs are driven by a shortage of housing.

How can they tell that the nation's supply is adequate? They look at the ratio of homes to households. What's the definition of a household? An occupied housing unit. Here's a fun exercise: if you destroyed half the nation's occupied housing stock and forced people to move in together there would be no change in the number of homes per household. The number of homes per household tells you next to nothing about whether supply is adequate or not.

They then go on to say that, if anything, there's actually an oversupply of housing:

Fueled by the housing bubble of 2000-07, 160 homes were added to the stock for every 100 households formed during the aughts, our analysis of Census Bureau data shows. This level of production created a huge surplus of housing, which has yet to be fully absorbed.

Put differently, from 2000-21, the nation grew by 18.5 million households. To maintain an adequate inventory of vacant housing, which historically would be 9.3% of the total, the housing stock needed to expand by 20.2 million units. Instead, it grew by 23.7 million housing units, producing a surplus of 3.5 million units.

Again, this is nonsensical. Housing is somewhat durable; it lasts a pretty long time. But housing isn't fungible -- a home in Detroit does very little to offset demand for housing in San Francisco. This means if there are any regional changes in housing demand you should expect the number of homes per household to go up as people move from low to high demand areas and new housing gets built while existing housing remains.

Coincidentally, there has been a lot of internal migration -- the rise of superstar cities, reverse Great Migration, the surging Sunbelt and depopulation of the Midwest to name four big shifts in regional demand over the past twenty years. And we'd have had even more migration if housing supply been allowed to adjust, remember: population change is a measure of who did move, but demand is based on who wants to move.

Next they turn their attention to local areas:

Nationally, there is no shortage of housing, and adding to the surplus won’t resolve the nation’s affordability problems. Nor is there a shortage in most metropolitan areas. Of the 707 growing metro markets, only 26 have shortages of housing, with household growth exceeding housing-unit growth. In the remaining growing markets, housing supply and demand are in balance, with the growth of units equaling the growth of households or exceeding it by up to 10%.

Same problem as above. The number of households can only outpace the number of homes if vacant units come off the market. If more people want to move to San Francisco than there are available housing units then prices will go up until people are indifferent between locations even though by definition the number of homes per household will be equalized. In some places like Chicago there has also been a huge internal change in where housing demand is; South Side Chicago has been losing population for decades while the Loop has been gaining it, so mechanically the number of households should be below the number of new homes because housing is durable.

You can also pretty readily disavow yourself of the idea of a "local/national abundance" of housing by looking at rental and homeowner vacancy rates, either for the nation as a whole -- where both are currently at all time lows -- or for specific cities like San Francisco, New York, and Boston, where between 1989-2019, San Francisco has had four years with an above 6% rental vacancy rate, Boston four, San Jose six and the New York zero.

Note that you can square a falling rental/homeowner vacancy rate with more homes per households by looking at units held seasonally/off market/as second homes/abandoned/in need of repairs, which have increased as a percent of the housing stock the past twenty years. At best, you have a slightly minor point that a higher share of built housing isn't ending up on the market than you might expect, *not* that "enough housing has been built".

For the life of me though, I don't know how anyone says "there is no housing shortage in the NYC metro" considering how hard it is to find an apartment there... One of the authors even teaches in New York!

Lastly, at this point we have close to fifty years of evidence from economists that housing supply restrictions drive up prices, but you don't even need to appeal to any of it to show that the author's arguments are incoherent. Nor do the authors engage with any of this literature, they just brush it off with zero reference to any academic works.

So what do they say is the problem? Demand, mostly.

The housing markets with the greatest affordability problems are those with the greatest job growth and the highest wage levels. Shortages of housing don’t drive affordability problems as much as strong job growth and high incomes. This is what pulls up housing prices.

This is always a funny line of argument. Supply and demand aren't real! Only demand is real! If you take this seriously it's an incredibly bleak view of the world. We want strong job growth and high incomes! The benefit of more supply is entirely so that productivity gains don't end up in rent prices. Similarly, the reason we focus on supply is because ways to crush demand are, uhhhh, generally not things we like. If you wanted to reduce prices in San Francisco to what they are in say North Carolina just via demand you would likely need to:

1. Engineer a recession and crush incomes
2. Institute a Hukou system where you restrict who can move into San Francisco

Those two are very bad ideas! Their incoherence about where prices come from is a good reminder to anyone that it's not enough to make critiques of supply/demand as an explanation for prices. You have to then propose your own explanation. Urban planners aren't particularly gifted at that second part (or the critique part, honestly).

As an aside, it's also worth stopping to think about housing affordability more broadly, since this is something I think people in YIMBY circles often get wrong, and there's some kernel of truth in what they're saying, although not really in the way they're saying it. Specifically that there are places that are "unaffordable" but which don't have (or at least didn't have for much of recent history) meaningfully binding supply constraints.

There are different kinds of housing in-affordability. One is that rent prices are too high -- this covers the San Franciscos*, Palo Altos, Manhattans, and most wealthy suburbs of the US; places where rents are high but incomes are also very high. These places need lots and lots of supply. Two are places like Memphis, Detroit, Baltimore, and Cleveland -- they have lots of cost burdened households, but rent is actually fairly low, so while new supply is helpful the much larger issue are low incomes. Then there are places like Miami and large chunks of Southern California that have both high prices and low incomes -- they need both more supply and income support.

* San Francisco, interestingly, has one of the lower rent burdens of large cities, mostly because it's one of the only cities in the US where renters are rich.

To wrap, what do the authors think we should do about housing affordability?

Funnily enough, increase supply:

Zoning reform can encourage the production of multifamily housing, accessory apartments, and other less-expensive housing formats. Subsidized construction should be targeted for supportive housing and for affordable rental housing in places with actual housing shortages.

I genuinely have no idea how they wrote this and also wrote everything else. I guess they think that supply shortages are theoretically real, they just never exist in practice. Bizarre!

They do hedge their bets by saying that while zoning reform might work it would be too big a change. Saying:

[Zoning reform] would require a major intervention in the market, and the case for it is weak.

Author's note: this framing is nonsense. Zoning reform is just letting it be legal to build apartments. It's the current status quo of banning apartments, townhouses, and smaller single family homes in most of America that's the major intervention!

Really though, according to them, what we need to do is fix incomes:

U.S. housing policy should focus less on adding to the already ample stock of housing and more on raising the incomes of low-income households and giving them access to good-quality housing in safe neighborhoods. We know how to do this. Raising minimum wages to the living-wage level will help the working poor afford housing.

This is inconsistent with everything they've already said. If, according to them, high-income areas with good jobs are the problematic places I don't see how minimum wage increases do anything except end up in prices. There are poor renters in San Francisco and Santa Clara Counties, but Silicon Valley does not have an income problem overall. A family of four qualifies for housing assistance if they make 137,000 in Santa Clara County and 148,000 in San Francisco. Very low income is considered ~90K in both places and 60-65K for a single person household. It's not a demand issue and you can't subsidize your way out of a shortage.

I also don't know how you guarantee access to good-quality housing in safe neighborhoods without building more housing in those neighborhoods. Again, if there are five households looking for four homes, one of them is going to lose out regardless of how high their incomes are.

As I mentioned before, there are places where affordability legitimately is more of an income issue than a supply issue, and for the ~50% of the population not in the labor force, they will always need a subsidy of some kind, regardless of wages. So no one is seriously saying you don't need to do anything on the demand side. But denying supply and subsidizing demand is like lighting your legs on fire because you're freezing in the cold.

Finally, the problems of constrained housing supply aren't just about high prices, they also make all of us poorer. Even if unmet housing demand in San Francisco was offset by homes elsewhere, that's still a big problem because it means people can't live where the jobs are. As of 2009, building enough housing in high opportunity cities would have been equivalent to writing the average worker a $5,300 check every year, and that number is likely a substantial underestimate as spatial misallocation has gotten worse not better since then.