Two new studies are challenging the premise behind California’s so-called ‘abundance agenda,’ which promotes market-driven solutions to the state’s housing crisis.
The findings matter as they directly address policies supported by state Sen. Scott Wiener, Gov. Gavin Newsom, and Mayor Daniel Lurie, who have advocated for legislation aimed at increasing housing supply through deregulation and incentives for market-rate development.
A Federal Reserve paper reviewed in a recent article argues that allowing developers to build taller and denser housing will not result in affordable family housing except for wealthy families. The report states: “We find that average income growth relates strongly to house price growth and that house prices generally keep pace with average income. However, there is almost no connection between average income growth and growth in housing supply. Instead, housing supply growth has a strong positive relationship with population growth. In fact, almost all metro areas saw housing units grow faster than their population—even in expensive residential markets like Los Angeles or San Francisco.” According to the article, “Economic inequality has a lot more to do with the affordability crisis than ‘constraints’ on development.”
The Georgetown Law report reached similar conclusions after examining six urban areas—Atlanta, Dallas, Houston, Phoenix, Seattle, and Washington D.C.—where new construction exceeded national averages. The study found: “In all six High-Growth Metros, recent construction was concentrated among a narrower range of housing types compared to older housing stock. Construction of large multifamily buildings increased, with smaller units making up a larger share of the apartments. On the ownership side, the size of new single-family homes continued to be larger, potentially limiting the availability of smaller, lower-cost homes. These trends illustrate a gap in new supply, where lower-income households—especially families with children—are likely left with fewer housing options that meet their needs.” The report also noted: “As these higher-growth metropolitan areas added new supply, lower-income households without a rental subsidy faced larger rent increases than higher-income households in 5 of the 6 High-Growth Metros… Some evidence shows that this process has stalled or reversed.”
Both reports suggest that government intervention through increased spending on subsidies and affordable housing may be more effective than relying solely on private market solutions.
For further details see the original article.
