This paper examines whether there is a housing affordability problem in America by comparing house prices to the costs of new construction. It then proceeds to investigate why prices far exceed construction costs in certain areas. In most of the country, home prices appear to be fairly close to the physical costs of construction. Only in particular areas, especially New York City and California, do housing prices diverge substantially from the costs of new construction. The bulk of the evidence examined indicates that zoning and other land use controls are responsible for prices in high cost areas of the country. This indicates that restrictions on supply and new development, not just high demand for certain regions, are responsible for the housing affordability problems that do exist. The results also suggest that if housing affordability advocates are interested in reducing housing costs, they would do well to start with zoning reform, and not focus as much on public or subsidized construction programs.
Affordable Housing Architecture Asia Borrowing Constraints Canada China Colombia Commercial Brokerage covid-19 CRE Credit Risk Transfers Debt Market Demographics Development e-Commerce Equity Market Ethnic Factors Europe Foreclosures Global Global Financial Crisis hospitality Housing & Residential Housing Supply India inflation Investing land use regulation Macroeconomics Microeconomics Mixed-Use Mobility Mortgage Rates Mortgages Multi-family Non-Traditional Mortgages office sector Political Risk Real Estate Investment Trusts Recession Rental Retail South America Sub-Prime Mortgages Sustainability United States Urban Urbanization work from home