Across much of the Western world, the price of housing far exceeds the cost of building it. Many regions are suffering from increasingly severe housing supply challenges, with the typical renter spending a quarter more on housing today than in 1980. The Washington, DC, region, led by Arlington, Virginia – just over the Potomac river – has shown a way to avoid the worst of the crisis. By concentrating apartments around transit, buying the most-affected locals in financially, and using the revenues to balance the budget, it has been able to permit more apartments than many of its peer regions over the past 50 years. This is a model other American cities could learn from.
In part, today’s housing affordability problems are due to economic and population shifts. As people move toward centers of the information economy and away from centers of manufacturing, they compete for housing. In general, people moving to these economies earn higher incomes than other residents, and bid up the price of limited real estate. In a particularly important case, the San Francisco Bay Area, house prices grew 932 percent in the past 40 years while overall consumer prices increased by 329 percent.
Overall the US has an abundance of land. Across the Sun Belt, US cities like Dallas and Atlanta have maintained relatively attainable housing by sprawling out in all directions. But many of the country’s highest-income cities face geographic constraints on new greenfield development plus regulations preventing homebuilders from building more densely in developed areas when demand increases. In these places, housing is unaffordable to many and becoming more so.