The Housing Crisis Is a Policy Choice
For forty years, American cities and towns have known what to build and chosen not to build it. The shortage we are living with is not a mystery — it is a decision, made repeatedly, by specific people with specific interests.
In 2010, the city of San Jose, California, had more than 68,000 single-family home lots zoned for no other use. The city had built a subway system connecting downtown to the airport, a convention center, a new city hall, and a downtown entertainment district. It had attracted a significant portion of the global technology industry. It had not significantly changed its zoning code.
In 2010, the median home in San Jose cost roughly four times the median household income. By 2026, it costs roughly ten times. The technology industry has continued to grow. The subway system has extended. The entertainment district has expanded. The zoning code remains substantially unchanged.
This is not a story unique to San Jose. It is a story about the relationship between land-use policy and housing costs that has played out in virtually every major American metropolitan area over the past four decades, and it has produced a housing crisis that is not mysterious, not intractable, and not the result of forces beyond human control. It is the predictable and well-documented consequence of specific policy choices, made by specific people, for specific reasons.
Understanding why those choices were made — and why they persist despite their obvious costs — requires understanding something uncomfortable about American local politics.
The basic economics of housing are not complicated. When demand for housing in an area exceeds supply, prices rise. When prices rise and new supply cannot be added to meet demand — because zoning prevents it, because permitting takes years, because development costs have been layered with fees and requirements — prices rise faster. When prices rise faster than incomes, housing affordability deteriorates. When housing affordability deteriorates in a city or region with job growth, workers are displaced, commute times lengthen, economic mobility declines, and homelessness increases.
This is not a novel observation. It is the consensus of economists across the political spectrum. Studies from the Harvard Joint Center for Housing Studies, the Brookings Institution, the libertarian Cato Institute, and the progressive Urban Institute reach essentially the same conclusion about the mechanism of the housing crisis: supply is constrained by local land-use regulations that prevent enough housing from being built where people want to live.
The policy response implied by this diagnosis is also not complicated, at least in theory. Zones that currently allow only single-family homes can be amended to allow duplexes, triplexes, and small apartment buildings. Parking minimums that increase construction costs and reduce buildable area can be reduced or eliminated. Permitting processes that currently take two to five years can be streamlined. Height limits can be raised near transit. Impact fees and design requirements can be rationalized.
Cities and states that have implemented versions of these reforms have seen results. Minneapolis eliminated single-family zoning citywide in 2019; rents in the city have grown significantly more slowly than in comparable Midwest cities. New Zealand passed nationwide zoning reform allowing medium-density housing near transit throughout the country; housing starts increased substantially. Oregon, California, and Montana have all passed legislation overriding local single-family zoning restrictions. The evidence base for the effectiveness of supply-side reform is, at this point, substantial enough that the burden of proof has reversed: it falls on those who oppose reform to explain why the expected results won't materialize.
So why hasn't it happened everywhere? The question is political, not analytical.
The homeowners who live in single-family neighborhoods are not opposed to housing affordability in the abstract. Most of them would tell you, if asked, that they support affordable housing. What they oppose is affordable housing in their neighborhood — and they have good financial reasons to oppose it. A homeowner who purchased a house in a neighborhood of single-family homes made a large financial bet on the assumption that the neighborhood would remain as it is. Upzoning — allowing higher-density development — potentially changes the character of the neighborhood, the competition for parking, the noise levels, the school populations, and the value of the existing homes.
Whether upzoning actually depresses home values is a contested empirical question; the best evidence suggests the effects are small and localized. But the perception that it does is widespread among homeowners, and in local politics, perception is frequently more powerful than evidence.
Local government is where housing policy lives in the United States — with city councils, planning commissions, and zoning boards — and local government is uniquely accessible to organized, high-stakes interest groups. A homeowner whose $1.5 million home is affected by a proposed upzoning has a very large financial interest in opposing it. A renter who would benefit from lower rents has a diffuse interest that is harder to mobilize. The result is that local political processes systematically overweight the preferences of existing homeowners and underweight the preferences of potential future residents.
This is not a failure of democracy. It is a known feature of collective decision-making in environments with high stakes, organized opposition, and diffuse benefits. What it means is that solving the housing crisis requires either changing the incentive structure facing local politicians — which state preemption laws attempt to do — or building a counter-coalition of interests powerful enough to overcome homeowner opposition.
The interesting political development of the past five years is that a counter-coalition has begun to form. The YIMBY (Yes In My Backyard) movement, which started as a handful of tech workers in San Francisco arguing for denser development, has grown into a nationally organized political force that has succeeded in passing state-level zoning reform in several states and is building electoral power in urban and suburban districts.
What makes the YIMBY movement politically interesting is its ideological heterodoxy. It includes libertarians who believe in property rights and market solutions, progressives who believe affordable housing is a social justice issue, urbanists who believe in dense walkable cities for environmental reasons, and economists who believe supply constraints are causing broad economic dysfunction. This coalition is unusual in contemporary American politics, where ideological sorting has made cross-cutting alliances rare.
Whether it can sustain itself through the political fights required to actually change policy at scale is an open question. The opposition is well-organized, well-funded, and highly motivated. Every state and city that has attempted significant zoning reform has encountered fierce resistance from existing homeowners, often organized through neighborhood associations and local political clubs that have deep roots in community politics.
The stakes are large. The housing crisis is not just an affordability problem; it is a productivity problem, a mobility problem, a climate problem, and a democratic problem. Cities that cannot house the workers who want to live in them are cities that cannot achieve their economic potential. A country in which home ownership is increasingly a birthright of the wealthy rather than an aspiration available to the middle class is a country in which the social contract is fraying in ways that are felt long before they are articulated.
The decision to build more housing, or not to, is made by elected officials who are accountable to voters. Voters who understand the consequences of inaction are voters who might demand different decisions.
Rachel Stern is a staff writer at The Auguro covering economics, urban policy, and housing.