During the worst days of Covid, when supply chains broke down for automobile production, the cost of used cars skyrocketed in response to the limited supply. Over time, car manufacturing began to rebound, and prices moderated.
But when it comes to housing, there is a perpetual supply malfunction that inflates costs: local government zoning policies that expressly forbid developers from building homes where people want them. Ordinances routinely ban the construction of multifamily housing and require homes to be built on very large lots, artificially boosting the price of shelter—the single biggest expense for most Americans. These policies serve the narrow interests of wealthier incumbent homeowners, and they make life more difficult for young middle-class families starting out and low-income families who must make choices between paying rent and buying food or medicine.
People often think that the free market is what gives communities their dramatically different housing costs and demographic makeups, but that’s only part of the story. In a market economy, communities with strong public schools and safe streets will, of course, command higher property values. Homes in those areas could be made much more affordable, however, if localities made it possible to build more units on the available land.
