The Housing Crisis is Worse Than We Thought
Millennials and Gen Z were implicitly promised that if they simply worked hard in school and secured a job, they were well on their way to owning a house and its accompanying suburban dream. It’s become common knowledge that these efforts are no longer sufficient. In the midst of concerning levels of inflation and unemployment, housing prices continue to rise at unprecedented rates across the United States. Real estate prices are primarily determined by supply and demand. Exorbitant housing prices, therefore, result from a market failure to construct more housing. Thus, the US housing crisis is more a challenge of navigating a political quagmire than one of economic comprehension.
One political obstacle in fixing the housing crisis is a disturbing trend concerning housing ownership: a growing proportion of homes are owned by institutional investors. A common refrain from institutional investors is that they comprise a relatively miniscule share of the housing market. This statistic, while technically true, is heavily misleading. Institutional ownership of housing is heavily clustered in particular cities, many of which are at the forefront of housing unaffordability. In fact, Blackstone owns 100% of housing units in some countries (Source). It’s not hard to imagine predatory practices, such as rent fixing, emerging under local housing monopolies.
Another political obstacle in fixing the housing crisis is the ocean of NIMBY local housing regulations. For example, it is illegal to build multi-family housing on most residential land in the US. Broad-scale amelioration of housing restrictions and inefficiencies is largely intractable; most housing policies require overturning at the local level—a level where it’s often difficult to overcome a local NIMBY majority. To rally individuals across so many municipalities in order to overturn regulations unique to their communities is unfortunately obscenely difficult. Due to the nature of the law as an increasingly complex entity, it’s hard to tell how much hope we have for the US housing market.
