Thursday, August 07, 2014

Housing Affordability and Supply Side Economics

Dr. Doom weighs in on the debate about housing supply versus demand at Pacific Standard magazine.

Theme: Housing affordability geography.

Subject Article: "San Pedro project illustrates a cause of limited housing affordability."

Other Links: 1. "Fleeing New York and San Francisco for ‘Cleveland’."
2. "Supply Side Economics: Do Tax Rate Cuts Increase Growth and Revenues and Reduce Budget Deficits ? Or Is It Voodoo Economics All Over Again?"
3. "Nouriel Roubini: Professor of Economics and International Business Stern School of Business, New York University."

Postscript: Supply-side economics (e.g. Laffer curve) make intuitive sense, thus appealing to politicians who are pursuing some other agenda. Theoretically, everything is a go. Practically, when academic scrutiny is applied to practice, the suggested benefits disappear. The journey from abstraction to on-the-ground change is a perilous one. The main disconnect I see is taking Glaeser's work (which establishes a link between supply restrictions and housing prices) and assuming that the practice of upzoning (one of many supply-side avenues) will deliver affordable housing. Dr. Doom's cautionary tale teaches us to beware of such claims "about the magnitude of these effects". Glaeser is today's Laffer.


Done By Forty said...

Good stuff as always, Jim. Public policy isn't always going to have the impact desired.

Do you read Garth Turner at I love his take on the rising real estate prices in Canada.

Allen said...

Policy - whether it's free post secondary school or reduced capital gains tax does not make a measurable difference in the short run. There are far too many other variables for it to do.