The Paradox of American Housing

How the tension between housing as an asset and as an essential good keeps the supply inadequate and costs high.

2 minute read

March 26, 2024, 6:00 AM PDT

By Diana Ionescu @aworkoffiction


View of Austin, Texas skyline with river in foreground during morning golden hour.

ATX Drone Pros / Adobe Stock

Using Austin, Texas as an example, Derek Thompson explains America’s ‘magical thinking’ about housing in an article for The Atlantic.

According to Thompson, “Since the beginning of the pandemic, even as rent inflation has gone berserk nationwide, no city has experienced anything like Austin’s growth in housing costs. In 2021, rents rose at the most furious annual rate in the city’s history. In 2022, rent growth exceeded every other large city in the country, as Austin’s median rent nearly doubled.”

Unlike many other cities, Thompson writes, Austin “experimented with the uncommon strategy of actually building enough homes for people to live in. This year, Austin is expected to add more apartment units as a share of its existing inventory than any other city in the country.”

This is, unequivocally, a good thing. But an article in The Wall Street Journal takes an alarming tone, calling the resulting drop in rent prices a ‘downswing.’

“If rising rent prices are bad, but falling rent prices are also bad, what exactly are we supposed to root for in the U.S. housing market?” Thompson asks. This may depend on whether you view housing as an investment and an asset or an essential good and human right. For Thompson, “Housing is, in fact, both a present need and a future investment. In a dual-side marketplace, I suppose you could argue that any change in price is bad for some party. But the externalities of housing abundance outweigh the loss to any particular party rooting to profit from scarcity.”

Thursday, March 21, 2024 in The Atlantic

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