The Relationship Between Rents and Housing Supply

Despite a strong belief in market forces in many other aspects of the economy, many Americans don’t see a correlation between housing supply and housing costs.

2 minute read

August 9, 2023, 5:00 AM PDT

By Diana Ionescu @aworkoffiction


View of top of high-rise apartment building under construction with red and white cranes

Jonathan Stutz / Adobe Stock

Writing in New York Magazine, Eric Levitz points out the odd breakdown of the “comprehension of the relationship between supply and affordability” when it comes to the way many Americans think about housing.

If the government tightly limited the production of sneakers, thereby triggering a bidding war over scarce athletic footwear, few would question whether the state’s deliberate suppression of shoe manufacturing was implicated in rising sneaker prices.

But “A 2022 study from political scientists in the University of California system found that a majority of Americans do not believe that increasing the supply of housing makes it more affordable.”

While it’s true that new housing sometimes appears to lead to higher rents, “the reason why new construction sometimes correlates with rising rents is not that housing is a good unlike any other, such that the more of it you create the more expensive it becomes,” Levitz explains.

“Rather, the reason is that developers build new housing in response to rising demand.” If local regulations or NIMBY opposition blocks needed new housing from being built, prices will go up. “Thus the less new housing that gets built, the faster rents will rise in a booming city”—see Austin, Texas for a recent example.

Levitz counters the “popular idea that new market-rate housing can’t reduce rents for working people because private developers prefer to build ‘luxury’ properties instead of affordable ones,” writing that the high cost of new housing is largely due to high land costs, and “new buildings will absorb high-income renters, reducing demand (and thus rental prices) for older housing units.”

Ultimately, “We can’t fully resolve our housing crisis by unshackling the invisible hand. But widespread skepticism about the relevance of ‘supply and demand’ to the housing market is making the crisis worse.”

Friday, August 4, 2023 in New York Magazine

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Cover CM Credits, Earn Certificates, Push Your Career Forward

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

July 16, 2025 - Diana Ionescu

Green vintage Chicago streetcar from the 1940s parked at the Illinois Railroad Museum in 1988.

Chicago’s Ghost Rails

Just beneath the surface of the modern city lie the remnants of its expansive early 20th-century streetcar system.

July 13, 2025 - WTTV

Blue and silver Amtrak train with vibrant green and yellow foliage in background.

Amtrak Cutting Jobs, Funding to High-Speed Rail

The agency plans to cut 10 percent of its workforce and has confirmed it will not fund new high-speed rail projects.

July 14, 2025 - Smart Cities Dive

Worker in yellow safety vest and hard hat looks up at servers in data center.

Ohio Forces Data Centers to Prepay for Power

Utilities are calling on states to hold data center operators responsible for new energy demands to prevent leaving consumers on the hook for their bills.

July 18 - Inside Climate News

Former MARTA CEO Collie Greenwood standing in front of MARTA HQ with blurred MARTA sign visible in background.

MARTA CEO Steps Down Amid Citizenship Concerns

MARTA’s board announced Thursday that its chief, who is from Canada, is resigning due to questions about his immigration status.

July 18 - WABE

Rendering of proposed protected bikeway in Santa Clara, California.

Silicon Valley ‘Bike Superhighway’ Awarded $14M State Grant

A Caltrans grant brings the 10-mile Central Bikeway project connecting Santa Clara and East San Jose closer to fruition.

July 17 - San José Spotlight