^{Wealth & Poverty Review} Deregulate Housing to Increase Supply

Nationwide, there is a 4.5 million home shortage as of 2022, a 6-percent increase over the prior year. Although 1.45 million new homes were built in 2023, the number of families in the U.S. continues to grow. 

Vice President and presidential candidate Kamala Harris recently put forward policy proposals to address the housing shortage. Among them, Harris promises to build 3 million homes in the next five years and advocates for rent caps and against “corporate landlords.” Economists and policymakers on both sides of the aisle have been quick to point out the harms of rent capping and the need to remove regulations that stifle the creation of new housing.

In a recent New York Times article titled “The Best Plan for Housing Is to Plan Less,”Dr. Bryan Caplan of George Mason University argues that deregulation is the single most effective policy to increase the supply of housing and decrease housing costs. Caplan describes housing deregulation as a “panacea policy,” arguing that the evidence shows that “heavy-handed housing regulation is boosting home prices by restricting supply.”

The benefits from reduced regulation go beyond just increasing the supply of homes. Caplan presents data that demonstrates that reducing home costs has positive impacts on wealth inequality, social mobility, standard of living, carbon emissions, and even declining fertility rates.

In Washington State, the Department of Commerce has advised that 1 million new homes should be created in the next 20 years to meet the growing need for housing across the state. But instead of recommending policies that could spur housing development by removing financial and regulatory barriers, the authors focused on increased taxpayer funding and tenants’ rights legislation.

In Snohomish County, Washington, they have a better idea. Elected officials there have just passed four ordinances that loosen housing regulations with the goal of increasing housing supply. In the next 24 years, the county needs nearly 170,000 new housing units. Distinct from the Department of Commerce recommendations, a 2023 set of recommendations from Snohomish’s panel of housing development and policy experts included an array of deregulations to increase housing density in urban areas, reduce permitting red tape, and protect small landlords.

Two weeks ago, the Snohomish County Council passed a set of ordinances in line with those recommendations. The new legislation reduces minimum lot size requirements for higher density building, relaxes parking regulations to increase units in single-family developments, and increases flexibility around the subdivision of duplexes.

Councilmember Nate Nehring, who introduced all four pieces of legislation, describes the goal as “to get government out of the way by reducing unnecessary restrictions and costs so that there is greater flexibility to maximize home ownership opportunities for our residents.”

These legislative efforts incentivize the development of new homes by removing or loosening regulations that inhibit them. The result is more housing, and more housing means more affordable housing. As Nehring told me, “Too often, housing affordability conversations ignore market-rate housing needs and are instead dominated by efforts to increase government-subsidized units.”

Whether or not deregulation can alleviate all the housing woes across our country, there is no denying the basic economic principles of cost and supply — costly regulations decrease housing supply and affordability.

Snohomish County has the right response. Washington elected officials and presidential candidates should take note.