Trying to convert my sister (and anyone who will listen) into YIMBYism. I keep trying to make the argument that the reason housing is expensive is because we are not building enough to keep up with demand.
She is convinced that the reason rents are going up, in her neighborhood and in others, is that more units are being built. The extra units make the neighborhood *hot,* meaning more people want to live in that area. As a result, rents actually increase because demand outstrips supply.
I know from reading this sub that the solution to the housing crisis is to build more housing. I know that building housing units makes housing more affordable. But I am having trouble with this argument, other than saying that while induced demand might be an upward pressure, it is counteracted by the price decrease of the extra supply. Am I right, or is she? Literature would be appreciated.
Does building more housing induce demand, resulting in a net increase in prices?
byu/notaspleen inAskEconomics
Posted by notaspleen
1 Comment
Weight of the research says supply effects dominate amenity effects; to the extent that you’re concerned with endogenous amenities, you’re better off targeting high income areas for upzoning. the good news is that if you do a broad upzoning, most of the development will occur there naturally, as those tend to be the places most affected by supply restrictions.
(also, the amenity effects really only apply at a local level. at a metro level there’s not much ambiguity because an increase in amenities is often a reallocation of demand from one part of the city to another, such that the net upward demand pressure is much lower)
– https://www.lewis.ucla.edu/research/market-rate-development-impacts/