For example, suppose that there are a few dozen cattle ranchers near a pasture open to all. It makes sense for each rancher to let as many cattle graze as possible on the pasture, so that the ranchers can feed their cattle without buying additional land. But if every rancher lets as many cattle as possible graze, sooner or later the land will be overgrazed and the cattle may starve.
Today's NIMBY ("Not In My Back Yard")-based system of land use regulation has a similar illogic. Typically, an urban landowner who wishes to build additional housing units will need to request a rezoning, because existing zoning often bars densities higher than the status quo. Because no one other than the landowner and its neighbors care about the rezoning, municipal politicians often approve a rezoning only if neighbors do not object.
For each individual neighborhood, it may make sense to oppose such rezonings. New housing may lead to additional traffic, and may even lead to decreasing real estate values as the housing supply expands.
But what happens if every single neighborhood keeps out new housing? Housing prices may explode, because a reduced supply of any item is likely to raise the price of that item. San Francisco-size housing prices may be good for the NIMBYs, but are not so good for the region's overall quality of life.
And if there are not enough housing units in existing neighborhoods to meet demand, developers will build housing in depopulated (usually rural) areas where there are few neighbors to object. Because public transit usually does not serve the newest suburbs, the residents of these new homes will drive long distances to work, thus increasing vehicle miles traveled, which increases traffic congestion and air pollution for everyone (as well as the unforeseeable consequences of increased greenhouse gas emissions).
And if jobs move to serve the new suburbs' residents, eventually residents of existing urban and suburban neighborhoods will be forced to drive to those jobs to avoid unemployment, suffering from additional transportation costs and perhaps even from the traffic congestion they sought to avoid when they sought to exclude urban housing.
So even though NIMBY exclusion is good for its practitioners in the short run, we all suffer in the long run, making NIMBYism a classic example of the "tragedy of the commons."