Housing is expensive because the people who own it vote, and the people who do not own it yet vote less reliably. Zoning restricts supply where the jobs are. The restriction inflates the value of every home already built. And the households holding that value are the most dependable voting bloc in American politics. Everything else, rates and lumber and labor, is weather. This is climate.

The standard answers, briefly

The standard answers are true as far as they go. Construction costs rose. Interest rates moved. Builders underbuilt after 2008. But the research that actually decomposes prices finds something more specific: across most of the United States, home prices track the physical cost of construction closely. It is in a particular set of metropolitan areas, the California markets, Boston, New York, Washington, that prices detach from construction costs, and the detachment is attributable to zoning and land-use control.[1] Glaeser and Gyourko's estimates put the "zoning tax," the share of home value produced by regulation rather than construction, at ten percent or more of house value in New York, Boston, Los Angeles, San Francisco, San Jose, and Washington.[1] Scarcity in American housing is not a geological fact. It is written down in municipal code, and municipal code has authors.

The homevoter

William Fischel gave the authors a name: homevoters.[2] A house is most households' largest asset and their least diversified one, so homeowners behave like shareholders of the municipality, and they vote their portfolio. Restricting nearby supply is not spite. It is fiduciary self-management, conducted through zoning boards.

Now look at who holds the shares. In the Census Bureau's most recent annual figures, 79.5 percent of households headed by someone 65 or older own their home. Under 35, the rate is 36.3 percent, and falling.[3] The homevoter constituency is not just large. It is old, which means it votes in every election, including the municipal ones where supply is actually decided.

Why no one will fix it

Shelter is roughly a third of the Consumer Price Index: owners' equivalent rent carries a 26.6 percent weight and rent of primary residence another 7.6 percent.[4] Housing is therefore not one issue among many. It is the largest single component of the cost-of-living politics that decides national elections, and its price level is the net worth of the most reliable voters in the country. Neither party can afford to let home prices fall while their most dependable voters hold the equity. A party that engineered cheaper houses would be a party that chose to impoverish the electorate it already has, on behalf of one it might someday get. No such party exists, and the Institute does not expect one to be founded.

What happens next: the estates settle

The current arrangement has a demographic expiry date. Baby boomers hold half the nation's home equity, 17.3 trillion dollars as of 2024, and three-quarters of boomer homeowners intend to pass the home or its proceeds to family.[5] Freddie Mac projects 9.2 million fewer boomer-headed homeowner households by 2035.[5] That is the supply event of the century, arriving not as construction but as probate.

The buyer is already at the table. Institutional ownership of single-family rentals was effectively zero in 2011; large investors now hold roughly three percent of the national single-family rental stock, and more than twenty percent of it in metros like Atlanta, Jacksonville, and Charlotte.[6][7] Three percent is not a takeover. It is a position, held by the only class of buyer with the balance sheet to absorb estate-scale volume when it comes.

The Institute's view

Prices should be expected to remain supported through the remainder of the current holders' lifetimes, because the politics permit nothing else. New supply will concentrate in rental product, because that is what institutional capital builds and buys. The policy questions that matter are therefore not whether housing becomes cheap, it will not, but who operates the national rental stock that emerges, and at what rent. The Institute's Housing Opportunity program addresses that question directly.

Sources

  1. Glaeser, E. and Gyourko, J., "The Impact of Zoning on Housing Affordability," NBER Working Paper 8835, 2002. https://www.nber.org/papers/w8835
  2. Fischel, W., "Homevoters, Municipal Corporate Governance, and the Benefit View of the Property Tax," National Tax Journal 54(1), 2001. https://ideas.repec.org/a/ntj/journl/v54y2001i1p157-74.html
  3. US Census Bureau, Housing Vacancies and Homeownership, homeownership rates by age of householder, Q4 2024. https://www.census.gov/housing/hvs/data/prevann.html
  4. William Blair, "Gimme Shelter: Rental Prices and Inflation Dynamics," 2024. https://www.williamblair.com/Insights/Gimme-Shelter-Rental-Prices-and-Inflation-Dynamics
  5. Freddie Mac, "Silver Tsunami Likely to Bring Wave of Wealth to Children of Baby Boomer Homeowners," December 2024. https://www.freddiemac.com/research/insight/baby-boomers-impact
  6. US Government Accountability Office, "Rental Housing: Information on Institutional Investment in Single-Family Homes," GAO-24-106643, May 2024. https://www.gao.gov/products/gao-24-106643
  7. Urban Institute, "A Profile of Institutional Investor-Owned Single-Family Rental Properties," August 2023. https://www.urban.org/research/publication/profile-institutional-investor-owned-single-family-rental-properties