As the largest consumer spending category—bigger than healthcare—housing unaffordability is a primary driver of many societal problems. The economic damage from restrictive housing policies in the U.S. is estimated to be in the trillions of dollars.
Individual neighborhoods rationally reject development to avoid localized costs like noise and traffic, even though the broader region would benefit. This collective action failure requires higher-level government intervention to internalize the costs and benefits of growth for the entire area.
In markets like Silicon Valley, upzoning would increase land value so much that it would offset any decrease in structure price, making homeowners wealthier. Their opposition is often driven by non-economic factors or misinformation, not pure financial self-interest.
At public hearings, renters and homeowners often argue against new housing using contradictory economic claims—one fearing price hikes, the other price drops. This suggests their opposition stems from economic misunderstanding and expressive voting rather than coherent self-interest.
Voters often support policies they believe are good for their community and reflect their values, a concept called "expressive voting." This explains NIMBYism better than the theory that homeowners are just voting their pocketbooks, as the financial incentives are often misaligned with their actions.
When a city upzones, it becomes more attractive, pulling in new residents. If migration is slow ("molasses"), the new supply can lower prices in the short term. If migration is fast ("water"), demand may absorb new supply immediately, delaying price drops until a long-run equilibrium is reached.
Large firms buy single-family homes to rent when a gap emerges between low purchase prices and high rental yields. This arbitrage activity transfers homes from the owner market to the rental market, helping equilibrate the two without reducing the total number of available residences.
When a high-end apartment is built, its occupant vacates their previous home. This creates a cascading "vacancy chain" where units open up at successively lower price points, ultimately increasing availability for middle and lower-income residents.
Areas with cheap, plentiful housing have lower homelessness rates, even if they have higher rates of substance abuse. The "slack" in the housing market—spare rooms, empty units—provides a critical, informal safety net for individuals facing life shocks that is missing in expensive cities.
Most developed countries allow single-stair apartment buildings up to a fire ladder's height, but the U.S. and Canada mandate two interior stairwells for buildings over three stories. This rule makes it harder to build on smaller lots, stifling the kind of infill development common in European cities.
Rent control can lead to inefficient housing use. A middle-class family might hold onto a rent-controlled city apartment as a pied-à-terre after moving to the suburbs because it's too cheap to relinquish. This mirrors the misallocation problem of billionaires keeping vacant second homes.
A person who owns a home but desires a larger one is effectively "short housing." For them, a market-wide price decrease could be beneficial. While their current asset would lose value, the cost of upgrading to a bigger home would fall by more, making their long-term goal more attainable.
Officials with larger constituencies, like governors, tend to be more pro-housing (YIMBY) because they consider the region-wide benefits of growth. In contrast, local city councilors often cater to hyper-local NIMBY concerns. Elevating decision-making to the state level can overcome local opposition.