The methods for dealing with a supply shortage are well-known. Prices can be increased to curtail demand. Retailers can move inventory to areas with high demand. Manufacturers can increase their production. However, these methods have not been effective in addressing the housing shortage currently afflicting nearly every city in Texas.
Price increases have done little to slow demand for affordable housing. Moving inventory isn’t easy with housing, though advances in modular and other manufactured housing make it possible to mass produce housing at a lower cost. However, housing producers of every type face impediments to increasing production.
The most significant impediment is exclusionary zoning, and particularly single-family zoning. These regulations make certain types of housing illegal. Accessary dwelling units (also known as “granny flats”) are prohibited by single-family zoning, as are duplexes, triplexes, small apartment buildings, and manufactured housing. Indeed, nearly any type of housing except for a single-family home is illegal.
These types of restrictions make it impossible for housing innovators to implement solutions to the housing shortage problem. This is akin to requiring computer manufacturers to only make laptops with a seventeen-inch screen. While many want and need a seventeen-inch screen, others prefer a smaller screen. Computer manufacturers have the freedom to make an assortment of different products for a wide range of consumer needs and preferences. Housing producers don’t have that freedom.
Contrary to the claims of many housing advocates, the solution is not more controls and restrictions on housing producers. That approach is what has created the housing shortage and caused the price of housing to rise. The solution is to restore freedom to housing producers.
Technology companies regularly dazzle us with new innovations. Housing innovators can do the same, but only if they have the freedom to innovate. If we really want to address the housing shortage, then we must remove the barriers—all of the barriers—to increasing production.