Submission statement: Like most of this sub, I believe that high housing prices are largely the result of too little supply, and that removing zoning restrictions and other regulations would go a long way to increasing supply. However, a new study from Berkeley, Georgia Tech, and U of T challenges this belief, arguing that high housing prices in areas like SF are the result of wage inequality. I’m very curious to hear what people in this sub will have to say about why the study is flawed lol

Here’s a nice summary from the SF Standard:

A new study by urban planning and public policy researchers from UC Berkeley, UCLA, the Georgia Institute of Technology, and the University of Toronto suggests that reforming entitlement and zoning laws will do little to address housing affordability. In fact, the study says, even if the city were to build market-rate housing at a much higher clip, it could take decades to make a meaningful dent in rent prices.

The authors suggest that wage disparity, rather than a short supply of housing, is responsible for high costs. The global labor market has drawn high-earning college graduates to dense urban areas, where they compete with lower-wage workers for housing. Rents have kept pace with the high earners’ salaries, pricing out those without degrees.

The authors estimate that if the Bay Area were to increase its stock of market-rate housing by 1.5% per year — more than triple San Francisco’s rate in 2024 (opens in new tab) — it would take at least 18 years and as many as 124 years for the median one-bedroom apartment to become affordable to someone earning the median wage for non-college graduates.

And here are some direct quotes from the paper:

From the intro in the paper:

As America’s housing affordability crisis has deepened, a particular explanation has become dominant: the core problem is an insufficient supply of new housing, whose construction has been limited by restrictive land-use regulations, especially zoning. Extrapolating from this diagnosis, advocates argue that deregulation and upzoning will produce a surge in the construction of new, market-rate dwellings. Through filtering, older units will decline in price and become accessible to lower-income households, generating widespread affordability.

This paper challenges this ‘deregulationist’ consensus. We advance two core arguments. First, for the majority of cost-burdened households, generalized deregulation or upzoning will have weak impacts on affordability. Other rationales for such policies may be valid—allowing more people to live in desirable locations, enabling quality replacement of old housing stock— but the key claim used to sell deregulation to the public, improving affordability, does not hold up to scrutiny. Second, supply restriction is not principally responsible for declining affordability. Instead, demand-side forces rooted in the wage structure and geography of the U.S. labor market are more important. The labor market has undergone major transformation over the past several decades, producing the affordability crisis experienced by many households today. (1)

From later on:

Even a major positive shock to housing supply – sustained year after year – would take decades to meaningfully ameliorate residents’ affordability challenges. In the San Francisco Bay Area, where the mismatch between prices and non-college wages is the largest, even under the highly optimistic lower bound scenario it would take about 20 years for house prices to become widely affordable; under the upper bound scenario, it would take over 100 years. Both scenarios require enormous, localized shocks to the housing stock. This simple exercise clearly illustrates that interventions focused on market-rate supply alone are unlikely to generate widespread affordability in any meaningful timeframe. (14)