Supply Skepticism Revisited

In 2019, we noted the phenomenon of “supply skepticism” – the “questioning [of] the premise that increasing the supply of market-rate housing will result in housing that is more affordable” (Been, Ellen, and O’Regan, 2019, p. 26). We sought to systematically – and sympathetically – assess each of the key arguments supply skeptics were making, and to dispassionately review what research showed about the effects increases in the supply of housing have on housing affordability. We ultimately concluded that both the theory and the then-existing empirical evidence supported the premise that increasing the supply of housing reduces sales prices and rents or moderates their growth and therefore makes housing more affordable to low- and moderate-income families. We noted gaps in the evidence, however, and suggested the types of additional research needed to better understand the relationship between supply and affordability, and to explore which efforts to increase supply are most effective. We also emphasized that because the effects new market-rate housing1 may have on sales prices and rents might be slow to materialize and are unlikely to be sufficient to address the needs of very low-income households, local and state governments should seek to ensure that new supply (both “freemarket” and subsidized affordable housing) comes on line at a range of price points, so that growth is balanced among the various income levels in the community.

Much has happened in the four years since we published our article. The housing affordability crisis has become even more acute, widespread, and salient (see, e.g., Aurand et al., 2023; Joint Center for Housing Studies, 2023; McCue, 2022). Concern about the role land use regulations are playing in rising rents and sales prices (see, e.g., Ellickson, 2022; Gray, 2022; Schuetz, 2022; Gyourko et al., 2021; Dougherty, 2020; Badger & Bui, 2019) has led a number of state legislatures across the nation to walk back their deference to local governments somewhat, and intervene to remove local and state barriers to development. At the same time, however, resistance to new housing and land use changes continues to be both highly vocal and deeply felt.

Researchers also have produced a substantial body of rigorous and nuanced evidence about the effects increasing supply has on sales prices and rents, neighborhood composition, and neighborhood amenities. The new research, ongoing controversy, and growing affordability challenges make this an opportune time to revisit the arguments and evidence.

We first review the arguments supply skeptics have raised, then summarize the new studies completed over the past few years, and assess the answers they provide to the skeptics’ challenges. We then identify gaps in the evidence that remain and conclude.