I hear this a lot: "It's not a housing supply problem. It's an income problem."

Wages have stalled. Inequality is rising. People are hurting. But even if incomes rose tomorrow, we would still face a housing crisis because over the last fifty years we did more than make housing expensive. We made modest housing harder and harder to build.

The Broken Connection

In the 1970s, someone earning 70% of area median income could often afford a newly built apartment. That was not because wages were especially strong or subsidies were more generous. It was because the private market could still build modest, unsubsidized homes. Zoning was looser. Permitting was faster. Development costs were more manageable. There was still a functioning relationship between what renters could pay and what builders could deliver.

That relationship is now broken, and it did not break all at once. It was dismantled layer by layer through regulation, delay, litigation, and the accumulated cost of trying to get housing approved.

How We Broke It

  • Zoning restrictions exploded. Beginning in the 1970s, many cities downzoned large areas of land, excluding multifamily housing and, in some cases, even modest single-family lots. Research by Ed Glaeser and Joe Gyourko showed that in cities like Boston, San Francisco, and New York, housing prices became disconnected from construction costs. Scarcity was increasingly driven by regulation rather than fundamentals.
  • Permitting timelines stretched. The Wharton Residential Land Use Index shows that metro areas with more approval layers, supermajority requirements, and discretionary reviews produced less housing and experienced much longer delays. In highly regulated markets, approval timelines more than doubled.
  • Legal tools were weaponized. California's Legislative Analyst's Office found that more than three-quarters of CEQA lawsuits targeted infill or transit-connected development, including projects that complied with local zoning. In practice, these tools often blocked precisely the kinds of homes high-cost communities needed most.
  • Development costs surged. Hard construction costs rose sharply between 2000 and 2020. Land prices climbed in high-demand metros. But regulatory drag became the true accelerant. In some jurisdictions, impact fees alone can exceed $150,000 per unit before parking mandates, design standards, inclusionary requirements, and multi-year delays are even added in.

With each cycle, the rent needed to justify new housing went up. Capital pursued certainty rather than community need. As projects became slower, riskier, and more expensive, investment shifted toward higher-return product or fewer jurisdictions. Today, even developers who want to build more affordably often cannot make the numbers work.

A Production Breakdown

Up for Growth's research has identified an estimated national housing shortfall of 3.9 million homes — a deficit that reflects years of underproduction and grows when reform is delayed.

By the 2020s, many cities had crossed a dangerous threshold: a household often needed to earn 130% or more of median income to afford a newly delivered unit. That is not only an affordability problem. It is a sign that the production system itself has stopped functioning for a broad middle of the market.

The economic consequences are substantial. Housing supply elasticity has declined steadily. Underproduction deepened across economic cycles. Hsieh and Moretti estimated that if San Francisco, New York, and San Jose had maintained their earlier level of housing flexibility, U.S. GDP would be dramatically higher. That is the cost of exclusion showing up not just in rents, but in national economic performance.

Yes, we need stronger incomes, tenant protections, and public subsidy. But if the structural shortage remains in place, those interventions operate inside a system that still cannot deliver enough homes.

Path Forward

The answer is to reconnect what people can afford with what the public and private sectors actually allow to be built. That requires a near-term agenda, a medium-term strategy, and a longer-term commitment to housing as durable national infrastructure.

  • Today. Cut red tape, streamline approvals, legalize modest housing, and remove costly mandates so production can respond more directly to actual demand.
  • Tomorrow. Reduce cost through public land and infrastructure coordination, using federal, state, and local tools to lower barriers that now make modest housing infeasible.
  • The future. Build stable public financing capacity so housing production can be treated as long-term national infrastructure rather than a stop-start policy afterthought.

Questions for the Field

Consider your own community. Have you seen this affordability shift in new housing? Are local rules making it easier or harder to build what is needed? What is one achievable change that could begin reconnecting housing demand to housing delivery?

Those questions matter because the path out of the crisis is not theoretical. It depends on whether decision-makers are willing to confront the structural conditions that made housing both scarce and expensive in the first place.