Over the past decade, one of the most significant shifts in the American economy has been the soaring prices of housing and rents. In many areas across the country, both home prices and rental costs have been rising at a pace far outstripping general inflation and wage growth. While the rising interest rates were initially thought to cool down the housing market and curb the runaway price increases, the reality has been far from that. Instead, homebuyers and renters now face the dual challenge of higher prices and higher interest rates, creating a perfect storm for those hoping to buy or rent a home.
As the political landscape heats up, candidates from both sides are seizing on the housing crisis as a hot-button issue, often proposing solutions that are, at best, misguided and, at worst, counterproductive. Whether it’s subsidizing first-time homebuyers or reducing interest rates to make housing more affordable, many of these proposals only serve to exacerbate the problem. While politicians often seem to think they have the answer to this pressing issue, the real solution to the housing crisis is much simpler than most realize: increase the supply of housing.
The Political Mirage of Housing Solutions
Politicians love to promise solutions to housing affordability, and in the current environment, it’s easy to see why. Housing is one of the most immediate concerns for voters, particularly for younger generations struggling to find affordable homes or save for a down payment. As a result, candidates often propose ideas that seem like quick fixes—like subsidies for first-time homebuyers or even lower interest rates to make mortgage payments more manageable.
But here’s the catch: these proposals don’t solve the underlying problem. In fact, they can make things worse. Subsidies for first-time buyers, for instance, might help a few people get into homes, but they do little to address the root cause of high prices: a severe lack of supply. When demand outpaces supply, prices will continue to rise, no matter how much assistance the government provides. Lowering interest rates can also backfire by further inflating demand, making homes even less affordable in the long run.
These are all temporary band-aids to a structural issue, and they fail to take into account the core issue that needs addressing: housing supply. If we want to truly make housing more affordable, we need to stop making it harder to build homes and start removing the roadblocks that have been hindering developers for decades.
The Root Cause: Supply Shortages
While many focus on the price of homes and the challenges of getting a mortgage, the root cause of the housing affordability crisis lies in the supply side of the equation. Simply put, there aren’t enough homes being built to meet the demand. Over the past several decades, the U.S. has seen a significant slowdown in housing construction, particularly in areas where people want to live. This is a problem that has been decades in the making, and it’s largely due to a combination of restrictive zoning laws, overly complex building codes, and opposition from local communities.
Consider this: for homebuilders, the cost of construction has skyrocketed due to regulatory hurdles. From expensive and time-consuming permitting processes to building codes that add unnecessary costs, these barriers make it harder and more expensive to build homes. As a result, fewer homes are being built, and the ones that are tend to be priced higher to cover these added costs. This supply-demand imbalance drives up prices and makes it harder for middle-class families to find affordable housing.
What’s more, zoning laws and local opposition to new development—often referred to as “Not In My Backyard” (NIMBY) sentiment—further restrict the availability of land for new housing projects. Communities often resist new housing developments, fearing that they will lower property values or change the character of the neighborhood. But this resistance comes at a high cost: it limits the available housing stock and drives up prices for everyone.
A Better Solution: Remove the Barriers to Building
Instead of relying on subsidies or rate cuts that only paper over the problem, the real solution to the housing crisis lies in increasing the supply of homes. And the best way to do that is by removing the regulatory barriers that prevent builders from constructing affordable homes.
One key reform would be to streamline the permitting process. Right now, getting approval to build a new home can take months or even years, depending on the location. By speeding up this process and reducing the associated costs, we could make it much easier for developers to start building—and more affordable for buyers.
Another area for reform is building codes. While it’s important to have safety standards, many codes are unnecessarily restrictive and expensive. By revisiting these regulations and making them more flexible, we could reduce the cost of construction by up to 50%. This reduction in costs could make it feasible to build homes that are much more affordable for first-time buyers or low- and middle-income families.
Finally, zoning laws need to be reexamined. In many cities, zoning regulations make it difficult to build anything other than single-family homes. This has led to urban sprawl and a lack of density, driving up the cost of housing. By eliminating these restrictions and allowing for more mixed-use and multi-family developments, we could increase the supply of affordable housing in high-demand areas and bring prices down.
The Bottom Line: Political Solutions Won’t Cut It
At the end of the day, politicians who promise to fix the housing crisis by simply lowering interest rates or offering subsidies are missing the point. While these measures might provide temporary relief for a few people, they do nothing to address the real issue: the lack of affordable housing. The true solution lies in increasing the supply of homes, which requires reducing regulatory barriers, streamlining the permitting process, and changing zoning laws that limit development.
Only by creating a more favorable environment for homebuilders—where they can build quickly and affordably—can we hope to tackle the housing crisis in a meaningful way. Until that happens, the problem will persist, and the dream of affordable housing will remain out of reach for many Americans.
