Building more homes leads to lower housing prices, study reveals

Housing & Development

By April Bamburg | Mar 3, 2020

Increasing the amount of housing available in a community leads to more affordable housing, according to a study of U.S. census data published by Catalyst.

Cities can actually build their way out of the affordable housing crisis, the study shows.

It examined the permitting activities of Los Angeles, New York City, Boston, San Francisco, San Jose, Miami, Washington, D.C., Portland, Denver, Seattle, Atlanta, Phoenix, Dallas, Charlotte, Las Vegas, Nashville, Houston, Orlando, and Austin. 

Cities such as Los Angeles, New York City, Boston, San Francisco, San Diego and San Jose have been building fewer housing units than their cities require. When that happens, median home prices are generally higher, and vice versa.

Instead of judging cities based on one permit equal to one housing unit, Catalyst suggests that a more accurate way to judge elasticity (comparing construction activity with the demand for housing) is to measure permits per 10,000 residents. The study's author, Steve Beyer, writes that comparing permits against population is more accurate than the way the Building Permits Survey categorizes building (one permit equals one dwelling. Each unit in a multifamily property requires its own permit in this measurement)

Using the permits per 10,000 residents measure, New York City and Houston both issued about 61,000 or so permits in 2019. But the New York metropolitan area is far larger than Houston, and the 30.4 permits per 10,000 residents that New York built is far fewer than Houston’s 88.3 permits per 10,000 residents, according to Beyer’s number crunching of the Building Permits Survey information.

“One interesting thing about the 2019 data is that it’s scarcely different from the previous annual data, which is available on the Census website dating back to 2004,” said Beyer. “In almost every year since then (save the years during and after the recession), metro Houston, Dallas, and New York City were by far the top permit issuers, usually ranging from 40,000 to 80,000 per year."

Metro Los Angeles, Phoenix, Atlanta, Seattle and Washington, DC, have been the second tier, generally issuing between 20,000 to 40,000, Beyer said. "Many of the metros considered top examples of Nimbyism – San Francisco, Boston, San Jose, Portland – often issue fewer than 20,000 permits, and sometimes even down into the four figures.”

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U.S. Census Bureau

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