Research Highlights Podcast
October 8, 2025
Housing supply skepticism
Christopher Elmendorf discusses the views of the US public on the housing market.
Source: RoschetzkyPhotographyBigStock
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Most Americans that housing costs are too high, often blaming developers and landlords. Many feel that the problem can be solved with price controls, development restrictions, and mandates on providing below-market-rate units. But these ideas are at odds with standard economic policy prescriptions, which suggest that the way to bring down costs is by increasing the housing supply.
In a paper in the Journal of Economic Perspectives, authors , , explore how the public think about housing markets through surveys of thousands of urban and suburban residents. They found that while people understand supply and demand in markets like cars and agriculture, they struggle to apply the same logic to housing. The authors’ results may help efforts to shape better economic messaging geared toward the general public.
Elmendorf recently spoke with Tyler Smith about how he and his coauthors measured public beliefs about housing markets and why these beliefs differ from economic consensus.
The edited highlights of that conversation are below, and the full interview can be heard using the podcast player.
Tyler Smith: There's a standard narrative among economists that land-use regulations in the United States are stifling the housing supply and that homeowners looking to increase the values of their homes are the reason for the regulations. What made you think this story was missing something important?
Christopher Elmendorf: It seems plausible that homeowners would be concerned that a new development nearby might increase traffic or change their views or have some effect that's negative for their quality of life and that that would also affect their home's value. But there are a lot of regulations of the housing market that don't seem to have that character of trying to protect or keep things the way they are in local neighborhoods. In cities where there have been big escalations in home prices, you often see rent control or people lobbying for rent control as a response. Similarly, in many cities where housing prices have gone up, you've seen local adoption of what are sometimes called inclusionary zoning requirements, which are requirements that developers set aside a certain percentage of the units in a new project as housing that will be sold or rented to lower income people at a regulated price. And third, there are a number of states that, going back to the 70s or early 80s, responded to escalating housing prices by establishing planning frameworks that, in principle, could solve the collective action problem that exists among a large number of small local governments in a metropolitan region and require those governments to allow a little more housing supply than they might want on their own. But these state-level frameworks focused on the production of deed-restricted affordable housing rather than housing supply overall. So it seemed like there was something more that was going on in the pattern of regulation than just homeowners responding to potential local disamenity effects of a new development project. I was curious whether that pattern of regulation was somehow connected to broad public opinion or whether it was instead some by-product of interest group politics.
Smith: How did you go about investigating the public's beliefs about the economics of housing? What kinds of questions were you trying to get answers to?
Elmendorf: We conducted several surveys of residents of US metropolitan areas, which we basically defined as people who do not live in a rural zip code. We asked them to predict the price effects—whether prices would go up or go down or stay the same—of supply shocks in a variety of different markets. On housing markets, we asked within your metropolitan region if there was a new home-building technology that resulted in developers increasing the supply of housing or the stock of housing by 10 percent over the next five years, would home prices or rents be higher or lower compared to today? We did another version of the question where we posited not a new home building technology, but changes to land-use regulations that result in a 10 percent increase in the size of the housing stock over five years. We also asked questions about the effects of free-trade agreements on the price of consumer goods. We asked questions about the effect of a hypothetical new fertilizer that increased crop yields on the price of crops. We asked about the effects of increases in labor supply for a particular kind of skilled worker on wages for existing workers in that sector of the economy. And finally, we asked a question about the effect of supply-chain problems in the market for new cars on the price of used cars. That question, to my mind, is really the closest to housing, because, again, we're talking about a durable consumer good where you have people who have the choice of buying the new version of the good, a new car, or a used version of the good that's typically less expensive. And the question is, how do changes in the supply of the new version of the good affect the price of the used version of the good? Virtually everybody said that if supply-chain problems result in a shortage of new cars, the price of used cars goes up. But you don't have the same kinds of answers to questions about housing supply shocks caused by technology changes or deregulation.
Smith: What did the surveys reveal about the public's belief as far as the housing market goes?
Elmendorf: The big picture is that people have very ill-formed views about the price effects of regional supply shocks. They give very inconsistent answers. If you ask versions of the same question to the same person over time, only a minority of people—about 30 to 40 percent of people—think a large positive shock to their metro region supply of housing would cause home prices or rents to be lower in the future than they are today or lower relative to the counterfactual that would exist in the absence of that shock. But I wouldn't put too much stock in that as a real belief because if you ask the same people the same question or a very similar question later in the same survey, you'll often find people contradicting the answer they gave earlier, more so than they contradict themselves on questions about supply shocks in other markets. We had some people who took multiple versions of our survey months or a year apart. And on these housing-supply-shock questions, their answers were about as consistent across surveys as you would expect if they were answering at random. Our takeaway is not that people are what you might call ideological supply skeptics, like people who have some well-formed or firm belief that if you build new housing, it's just going to cause the price of existing housing to go up. Instead, they're more naive, or in a Bayesian sense, they have incredibly weak priors about the effect of regional supply shocks on the price of existing housing in the region.
Smith: Why might the public struggle to believe a kind of supply and demand reasoning about houses, but not other market goods?
Elmendorf: I don't have a great answer for you. All I can give you is some speculation. One is that the stock of housing within a metro region is always going to change slowly—it's a durable good; housing lasts for a long time. So even if you have a large increase in housing supply, it's still small relative to the size of the existing stock. And it happens over a period of time. People just may not experience the sudden disruptions in the housing market that, say, they experienced in the automobile market during the pandemic. It's also possible that people see local amenity or disamenity effects. Some people see local amenity effects from new construction, and then they generalize those local effects to beliefs about the regional market. But again, we're not really seeing evidence of a well-developed belief structure. What we're seeing is just confusion. A third thing is that people may reasonably assume that there's going to be some movement between regions in response to a regional supply shock. Indeed, if mobility is completely costless, in your standard economic model, a regional supply shock would not decrease the price of housing in that region, except insofar as it decreases the national market, because people will just move between regions, which would equilibrate prices.
Our takeaway is not that people are what you might call ideological supply skeptics, like people who have some well-formed or firm belief that if you build new housing, it's just going to cause the price of existing housing to go up. Instead, they're more naive.
Christopher Elmendorf
Smith: If the public and homeowners aren't blaming high house prices on a shortage of housing, who or what do they blame high house prices on?
Elmendorf: One of the questions we asked invited people to name up to three of eleven different actors as responsible for high home prices and rents in their area. The options we gave them included housing providers, like developers and landlords; governments, including state, federal, and local government; and groups that political scientists and economists have often held responsible for excessive regulation of the housing market, including homeowners, anti-development activists, and environmentalists. We basically tried to include all the different actors who are sometimes part of the discourse about high housing prices. Overwhelmingly, people blame developers and landlords. Homeowners are a little more likely to blame developers. Renters are a little more likely to blame landlords, but those are the two groups that are chosen far more than any other group. And almost nobody blames environmentalists or anti-development activists or homeowners. And this blaming of developers and landlords is very consistent within respondents across surveys. So while people seem to have very weak views about the price effects of a large regional supply shock, they have pretty well-formed or stable views that it's the developers and the landlords that are responsible for the high prices.
Smith: Does your research suggest any effective communication strategies or pitfalls? How might we change the public's mind?
Elmendorf: That's a really great question that I'm working on now. I have a follow-on paper with the same coauthors that randomly assigns people to be exposed to either no new information or one of three informational treatments, one of which is a summary of a couple of economics papers on the chains of moves induced by the development of new fancy housing on the availability of more affordable units elsewhere in the same metropolitan region. A second treatment that we used in that study was an analogy between the market for housing and the market for cars. The third treatment we used was a video produced by a Pacific Northwest housing advocacy organization that analogizes the housing market to a game of cruel musical chairs. All three of these treatments convey the idea that when new housing is built, it frees up other homes because people move into the new housing and that creates possibilities for people at lower points on the housing ladder, so to speak. But they convey this information in somewhat different ways. The economics treatment was a dry, just-the-facts treatment. The video was more lively and fun to watch.
It turns out all of these treatments changed both people's beliefs about the effects of supply shocks on prices and their preferences with respect to policies that increase the supply of market-rate housing. It changed their views about the relative efficacy of supply-side policies versus price-control policies or demand subsidies for making housing more affordable. But overwhelmingly the video had the largest treatment effect, and the size of the treatment effect is massive relative to the existing literature in both economics and political science about information and messaging treatments. That huge treatment effect isn't entirely surprising. If people have incredibly weak priors, which is the main takeaway from the current paper, then you would expect new information to cause them to update a lot. And that's in fact what we see. But whether that same kind of information that is conveyed in a minute and 45 second video is information that people would be exposed to or would be interested in watching in ordinary life, we don't know. We have no measure of the demand for information. All we can show is that when people are exposed to it, they update pretty dramatically.
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“The Folk Economics of Housing” appears in the Summer 2025 issue of the Journal of Economic Perspectives. Music in the audio is by .