Image by Pete Linforth from PixabayHousing has become unaffordable for all but the lucky few in many of the world’s great cities. Who can afford to live in New York or Paris? Yet, housing prices can be kept in check. Some cities have succeeded in doing so, as we shall see. The secret is simple: housing supply, which can be stimulated or thwarted by public policy. Basic economics teaches us that rising demand (say for bread) in the face of inadequate supply (of bread) will inevitably lead to higher bread prices. Housing is no exception. The answer, thus, if we wish to keep prices down is to provide more housing. That indeed is the right answer; but easier said than done. For bread, the normal workings of the market (bakers making more when demand increases) will keep prices in check.
Housing, on other hand, is rarely produced under normal market conditions. Housing as well as the makeup of the neighborhoods we live in are highly sensitive issues that directly affect our well-being. Almost all nations have laws and regulations that govern what can be built where; which is why zoning ordinances exist. No one wants a waste dump next door or a high-rise blocking out the sun. How housing markets are regulated varies greatly across nations, reflecting national conditions and tastes. High housing prices in many rich-world cities, not least in the United States, are largely self-inflicted, the result of public policy.
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