At its best, capitalism provides a cornucopia of products affordable to ordinary people. But when it comes to housing, the American economy is failing to deliver the goods. By one leading measure, housing prices in April 2022 were 15% higher, corrected for inflation, than their previous peak in 2006.
The free market has failed to deliver affordable housing to Americans because of government restrictions on supply. In those parts of the country, like Houston, where building activity is lightly regulated, prices remain low despite enormous demand. In other areas, including Boston and San Francisco, new developments are constrained by a thicket of building regulations supported by entrenched local interests—often referred to collectively as Nimby, or Not in My Backyard. Any new demand thus inexorably leads to higher home prices.
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Edward L. Glaeser is the Glimp professor of economics at Harvard University, a senior fellow at the Manhattan Institute, and contributing editor at City Journal.
This piece originally appeared in The Wall Street Journal