Bake More Pies

For more than one hundred years, government officials have decried the difficulty many Americans face when they attempt to buy a home. Indeed, housing affordability has become a rallying cry for both progressives and conservatives. Their solutions invariably involve one scheme or another for how to distribute the existing housing stock. Those solutions will fail, just as they have for the past one hundred years. The only solution that will successfully address America’s housing shortage can be found in your local bakery: bake more pies.

Bakeries know they will see increased demand for pies at certain times of the year. In response, they don’t develop schemes to distribute the pies equitably. They bake more pies. They increase the supply to meet the demand. And that is the solution for housing: increase the supply.

It is estimated that America needs four million housing units to meet the demand. This is a potential gold mine for housing producers, yet they cannot keep up with the demand. Why?

While there are many factors that contribute to the insufficient supply of low cost of housing, zoning and other land-use regulations are the primary culprits. Land-use regulations, and particularly single-family zoning, make it virtually impossible to build single-family homes that low- and middle-income households can afford.

As one example, a study by the Brookings Institute found that the cost of some lots zoned for single-family housing cost as much as $850,000! Even a modest home on that lot would drive the price well over $1 million. However, if a developer could build four townhomes on that same lot, the land cost per unit would fall to $212,500. The resulting housing would still be unaffordable for a low- or medium-income household, but this illustrates the impact land-use regulations have on the cost of housing.

If we truly want to make homeownership affordable for all Americans, the place to start is by eliminating the arbitrary barriers placed on housing producers. Just as a bakery is free to bake more pies to meet the demand, housing producers should be free to build more housing to meet the demand.