Housing Construction Slowest at Both Ends of Wealth Spectrum

Communities with the slowest rates of new housing construction are either heavily undervalued, leading developers to avoid them, or extremely wealthy, giving residents leverage to employ zoning and land use to block development.

1 minute read

October 9, 2022, 5:00 AM PDT

By Diana Ionescu @aworkoffiction

The housing shortage, while dire across the board, is hitting American communities differently, with some cities adding housing units at a rapid clip while others are seeing low or non-existent construction. Yonah Freemark of the Urban Institute analyzes the causes of this disparity.

Freemark explains, “I found variation within metropolitan areas stems from two primary trends: significant housing underproduction not only in undervalued communities that cannot attract development but also in many high-housing-cost communities that have leveraged land-use regulations to prevent new construction despite local demand for construction.” Freeman notes that “Indeed, of the nation’s most-in-demand municipalities—those where housing values are at least 30 percent higher than their respective metropolitan areas—less than a third added more housing than their encompassing region, despite plentiful developer demand to build there.”

This results in wealthy suburban enclaves essentially getting a “free ride,” Freemark argues, “watching their property values grow in response to demand—while gas station attendants, teachers, and service industry workers are priced out because of limited housing availability.”

To balance out this inequity, Freemark recommends “place-based investment” that targets undervalued communities and regulations or financial tools to “encourage or require” high-value cities to build more housing. “Such leverage could include conditioning transportation, infrastructure, and housing grant support on land-use rules encouraging housing development.”

Thursday, October 6, 2022 in Urban Institute

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