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REAL ESTATE
Why are Home Prices So High?
And how can the affordability squeeze be eased?
For decades, a housing shortage has skewed the economies of major U.S. cities. Since 2020, the trend has only accelerated.
Housing economists say the reason is obvious: American homebuilders have dialed back their production, in large part because of local restrictions on zoning and building permits. In their new book Abundance, the journalists and podcasters Ezra Klein and Derek Thompson call local red tape a major villain in the American housing crisis.
In the mid-20th century, American homebuilders churned out new houses. In the 1940s, for instance, the housing stock increased by 8.5 million homes, they write. But by the late 1970s, building permits began to lag, and throughout the 1980s and 1990s, building failed to match the pace of population growth. In the 2010s, new home construction fell off a cliff. The results are obvious now: Nearly 30% of Americans devote 30% or more of their income to housing.
Cities such as New York and San Francisco offer high-paying jobs but a brutal tradeoff — workers must endure grueling commutes to find shelter they can afford. In Manhattan and San Francisco the typical home costs well over $1 million.
