In the second half of the 20th century, it was easy for many young Americans to imagine buying a home early in their adult lives. Then something changed: The nation kept gaining population but stopped building enough homes to keep up.
The mismatch between supply and demand has caused home prices to soar in the 21st century, damaging both our economy and our social fabric. High prices prevent families from buying homes, feeling fully invested in their communities and building wealth. They increase generational inequality and breed cynicism among people in their 20s and 30s. They can prevent couples from having as many children as they want.
The toll is heightened by the fact that many of the cities with the most dynamic economies are the ones where housing is least accessible, including Boston, Los Angeles, New York and San Francisco. Some young renters who would like to remain in these areas leave for cheaper housing elsewhere. People from other regions sometimes cannot move in to accept new jobs, preventing them from taking a step on a path of upward mobility.
The regional variation in home prices today is striking and wider than it was in past decades.
Boston and New York City have built at a sluggish pace, and prices have soared.
The San Francisco Bay Area has built even fewer homes, resulting in the one of the nation’s highest price-to-income ratios.
Austin and other Texas cities offer a different story. They have allowed more construction, and homes there are more affordable than elsewhere.
Basic economic principles point to the solution: More supply of an item tends to lead to lower prices. Cities like Austin, Texas, have remained more affordable largely because they have built so many more homes.
Over the past decade, Austin has broken ground on 140 homes for every 1,000 households, compared with only 22 in San Francisco, 23 in New York and 27 in Boston. Austin’s construction boom is one reason that, even as the local population has grown, home prices have fallen 13 percent in the past several years, and rents have fallen, too. The new developments include a 66-story downtown skyscraper known as 6G, which is the city’s second-tallest building, and Easton Park, a suburban-style community where two-bedroom homes can sell for less than $325,000.
To be clear, Austin’s real estate market remains expensive. The area’s ratio of median home price to median income is 4.6, much higher than the ratio in most of the United States from the 1950s through the 1990s. Austin, too, would benefit from more construction.
The situation in expensive coastal areas, however, is far worse. They have enacted onerous zoning and building rules that limit home construction. They have allowed the “not in my backyard” instinct to prevail. Many of these areas vote Democratic and identify as politically progressive, yet their housing policies have increased inequality. By maximizing home prices, these parts of blue America have benefited existing homeowners, who tend of be older and richer, at the expense of everyone else.
Nationwide, the relationship between home prices and home construction is even stronger than many Americans realize.
This chart compares the rate of home construction over the past decade with the median home price in each area.
These areas have not built very much, and prices are high relative to incomes.
These areas are the opposite: They have built aggressively and kept prices lower.
In this corner are places that remain affordable despite not having built very much. Some are cities in relative decline, where housing supply is not expanding much but demand to live there is modest.
This corner contains places where prices are high despite high levels of construction. It contains fewer metro areas than the other corners. Some of the places here are resort towns where wealthy buyers have driven up prices.
To bring down housing costs, cities and towns need to make two principal changes.
First, they should loosen zoning laws to allow more multifamily homes. In many places, it is legal to build only single-family houses, not apartment buildings, town homes or duplexes. These policies are particularly damaging in older cities that lack large parcels of undeveloped land. Metropolitan areas that developed more recently like Austin; Orlando, Fla.; Phoenix; and Raleigh, N.C., can expand into previously empty lots or former farmland. Older cities like Boston, New York and San Francisco rarely can. In these cities, the efficient use of space is even more important.
Some places are moving in this direction. In 2019, Oregon became the first state to pass a law effectively ending single-family zoning. Several other states, including Maine and Washington, have since passed similar laws.
Still, zoning remains a major obstacle in many places, including much of the Northeast. Among other changes, states should prioritize zoning reform that would allow apartment buildings to be built near transit lines. This change could make an important difference in not only cities but also nearby suburbs. States should also reduce the minimum lot sizes for single-family homes, which would allow developers to build two or three homes in a plot that might otherwise hold a single mansion.
Second, cities and towns should make it easier to build where it is already legal. Changing a city’s zoning laws is often not enough to entice developers to build. They still have to clear bureaucratic hurdles before they can break ground.
Obtaining permits can be so labyrinthine that builders hire consultants whose sole job, for months or years, is to navigate the process. All told, permitting can raise the cost of development more than 30 percent and extend construction time by two years, according to a recent study of Los Angeles County. The process can include so many public hearings that NIMBY forces are able to persuade local officials to veto new construction before it starts.
Mandates are another problem. Some cities require that new buildings come with too many parking spots to make them feasible. Another example of a well-meaning mandate that can raise housing costs involves affordable housing, strange as that may sound. When officials insist that a development include too many affordable units, it can become unprofitable and never get built. In Denver a new affordable-unit requirement enacted in 2022 led to a sharp reduction in the number of permit applications for apartment buildings.
“Higher building costs and restrictive zoning have made it all but impossible in many places for builders to put up homes at price points that most Americans can afford,” Mark Zandi, the chief economist at Moody’s Analytics, said. “The key to solving the housing crisis is resolving the reasons why builders have been stymied from putting up more homes.”
Austin highlights the alternative approach. Its leaders understood that expanding the housing stock in any way, even with luxury apartment buildings, would ease pressure for renters or buyers at lower income levels. Higher-income residents move into the new construction, creating less demand for older buildings and reducing the prices to live there. Instead of constraints, Austin offered perks. If an apartment building included affordable units or its design was environmentally friendly, the city relaxed restrictions on building height and size.
Americans are rightly frustrated about the high cost of housing. Fortunately, the country has decades of evidence about how to bring down those costs: We need to build more homes.
Explore the data
Methodology
The data here comes from Moody’s Analytics. For most places, it covers the metropolitan statistical area, which includes the center city and outlying suburbs. For 13 large metro areas, we instead use data for metropolitan divisions. The finer data allows us to separate New York City and its inner suburbs from Suffolk County on Long Island and Newark, for example.
Median home prices are for single-family homes. Housing start data is the annual average of starts per 1,000 households during the 10 years ending in 2025.
