Supply Skepticism: Housing Supply and Affordability

By Vicki Been, Ingrid Gould Ellen, Katherine O’Regan

NYU Furman Center, NYU Wagner School and NYU School of Law

10/26/2017

http://www.law.nyu.edu/sites/default/files/Been%20Ellen%20O%27Regan%20supply_affordability_Oct%2026%20revision.pdf

The arguments skeptics advance in opposing increases in the supply of housing are inconsistent with the evidence, and if successful in defeating most proposals for additional housing, are likely to result in significant harms. They do, however, underscore the need for some governmental intervention in housing markets to require or incentivize a balanced approach to new development.

A considerable body of research shows that additions to supply are critical to moderate price increases, allow workers to move to areas with growing job opportunities, and help subsidy dollars serve more low- income families.

Broader effects of limiting housing supply, including market rate housing:

1. Restricting supply imposes environmental and other costs related to auto mobile dependence - sprawl, auto dependence, poor air quality, increase greenhouse gas emissions

2. Restricting supply exacerbates income and racial/ethnic segregation - there is evidence that shows a connection between land use restrictions and segregation.

3. Restricting supply reduces economic productivity and increase inequality -

Supply restrictions that prevent people or businesses from locating in the neighborhood they prefer can result in lower productivity and deadweight losses; there is strong evidence that businesses thrive and workers are more productive when tehy are located in large, dense cities with lots of diverse economic activity. Constraints on housing supply in a city inihibit the growth and diversity that is essential to productivity.

Further, to the extent that land use regulations restrict the supply of housing and raise prices, they make it more difficult for workers to move to the cities with more productive businesses.