Ive heard repeatedly when trying to learn about our housing situation that we don’t have enough homes. I don’t understand how that’s the case or if it’s even true. Who or what is stopping more homes from being built exactly? If the demand is so high and the supply is so low then the suppliers would obviously ramp up production, right?
In: Economics
North America has a general housing shortage, particularly in high demand areas like cities. We are not building housing anywhere near as fast to keep up with demand.
This drives up the cost of housing because people are have to pay more to get a house to compete against every other potential buyer.
Other factors like increasing immigration, corporate ownership of houses for rental properties, and the rise of AirBnBs further reduces the number of available houses. Yet all of this is secondary to the root problem which is we just aren’t building enough housing.
As for why we just don’t build more houses?
– The housing market is tightly regulated. There’s a lot of permits and zoning laws in the way that limits what housing companies can build.
– Land in major cities is expensive and in high demand
– low-income housing is in high demand, but isn’t profitable to build
– Housing contractors focus on luxury condos and upper middle class homes because they are more profitable.
– Less apartment complexes are being built because of a focus on short term profits.
– The US builds and maintains a fraction of the amount of government subsidized housing that Canada or the UK builds.
– The NIMBY crowd (Not In My Back Yard) in suburbs in particular fights against building low-income housing and apartment complexes because it is seen as negatively impacting the neighborhood and housing values.
– Housing in North America is seen as an investment instead of just a home. Saving money is very difficult in this era so home ownership is more important than ever to save money for retirement.
The Japanese by comparison don’t have these problems. Tokyo is the largest metropolitan city in the world but they don’t have a housing shortage.
Why?
Housing quality is generally lower, zoning laws and permitting is easier, individual units are smaller, and the construction industry is much bigger and more efficient than here.
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