The Folk Economics of Housing

Christopher S. Elmendorf, Clayton Nall and Stan Oklobdzija

Journal of Economic Perspectives, 2025, vol. 39, issue 3, 45-66

Abstract: Why is housing supply so severely restricted in US cities and suburbs? Urban economists offer two primary hypotheses: homeowner self-interest and political fragmentation. Homeowners, who outnumber and have organizational advantages over renters, are said to lobby against development to protect their property values. The fragmentation hypothesis emphasizes that development's negative externalities are borne locally while most of the benefits accrue regionally or nationally, leading localities to block housing. This paper offers another explanation: ordinary people simply do not believe that adding more housing to the regional stock would reduce housing prices. Across three original surveys of urban and suburban residents, only a minority of respondents say that a large, positive, regional housing supply shock would reduce prices or rents. These beliefs are weakly held and unstable (suggesting people have given the issue little thought), but respondents do have stable views about who is to blame for high housing prices: developers and landlords. Large, bipartisan supermajorities support price controls, demand subsidies, and restrictions on putative bad actors, policies which they believe would be more effective than supply liberalization for widespread affordability. We discuss the implications of these findings for efforts to expand the supply of housing.

JEL-codes: D72 D83 R21 R23 R31 R58 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/jep.20241428

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