Why Housing Is Artificially Expensive and What Can Be Done About It (with Bryan Caplan)

Episode Summary

Executive Summary: Russ Roberts and Brian Kaplan discuss Kaplan’s graphic-novel book on housing regulation, arguing that restrictive zoning, parking mandates, delay, and activist-driven review make housing artificially scarce, expensive, and exclusionary. They connect housing policy to inequality, mobility, environmental outcomes, aesthetics, and family formation, while defending by-right development and broader deregulation as the best path to affordability and opportunity.

Main Topics: Housing scarcity is policy-made, not natural (Priority: 5/5): Kaplan argues high housing prices reflect artificial constraints on supply, especially in desirable cities, rather than unavoidable market scarcity. Vertical construction could expand supply if governments allowed it. Regulation drives prices through zoning, parking, and delay (Priority: 5/5): The conversation covers height limits, minimum lot sizes, parking minimums, and long approval processes as mechanisms that raise the cost of building and reduce the number of units produced. Public opinion and NIMBY politics (Priority: 4/5): Kaplan says broad public support for regulation comes from mistaken beliefs about supply and demand plus sensitivity to complaints about traffic, noise, birds, and neighborhood character; activists amplify these concerns. Aesthetics, character, and the unseen future (Priority: 4/5): Roberts presses the argument that deregulation could destroy the charm of historic cities. Kaplan responds that development can improve beauty and that preserving today’s city can block tomorrow’s great building. Housing and broader social outcomes (Priority: 5/5): The discussion links housing costs to inequality, mobility, family formation, and access to jobs, arguing that expensive housing harms renters, young adults, and lower-income households far beyond the housing market itself. Environmental effects of density (Priority: 4/5): Kaplan argues dense, newer urban housing generally lowers per-person emissions and that blocking construction in low-emission regions can push people to higher-emission regions, worsening total carbon output. Policy reform and by-right development (Priority: 5/5): Kaplan favors eliminating height limits, minimum lot sizes, and parking mandates, and expanding by-right development so compliant projects cannot be delayed or denied by discretionary hearings.

Key Arguments: Housing is about 20% of the typical U.S. household budget, so regulation affects a huge share of living costs. High prices in places like San Francisco, New York, and Tel Aviv are not just supply and demand in a natural sense; they are created by artificial limits on building. Modern construction technology makes dense, tall, and safe housing feasible, but zoning and permitting block its use. Parking requirements raise housing costs by forcing developers to build expensive garages or lots and by underpricing street parking. Public resistance to development is often based on mistaken beliefs that more building will raise, not lower, prices. Community activism and discretionary hearings give outsized power to a small, unrepresentative group of opponents. Density can improve environmental outcomes through shared walls, better insulation, and locating more people in lower-emission regions. Existing homeowners are not always harmed by deregulation; they may benefit from sale opportunities, easier upgrading, and lower costs for their children. The best reform is by-right development: if a project meets objective rules, the permit must be issued without discretionary delay. Historic charm is not a decisive argument against development because many beloved buildings and skylines replaced earlier structures once thought precious.

Data Points: Housing share of typical budget: 20% - Kaplan says housing is about one-fifth of the average U.S. household budget. Life and Fate length: 872 pages - Roberts promotes the EconTalk book club reading of Grossman’s novel. Regulation data on public beliefs: About one-third / one-third / one-third - Kaplan says the U.S. public is split on whether more construction lowers prices, has no effect, or raises prices. Land ownership by government in the U.S.: About 33% - Kaplan notes federal and state governments own roughly one-third of U.S. land. State land ownership: About 10% - Kaplan estimates states own around a tenth of U.S. land. Federal land ownership: About 23% - Kaplan estimates the federal government owns around 23% of U.S. land. Population growth example: Large multiplication over 50 years - Kaplan cites Houston as a city whose growth illustrates the effect of looser regulation. Parking regulation example: 2 or 3 spots per apartment - Kaplan describes common housing codes requiring multiple parking spaces per unit. Black Friday parking standard: Enough spots for the busiest day of the year - Commercial parking rules often require capacity for peak demand, usually framed as Black Friday. Light pollution compromise example: 30 houses reduced to 23 - Kaplan recounts a Wyoming case where neighbors blocked seven homes over star-view concerns.

Pivotal Quotes: "The scarcity is not natural." — Brian Kaplan: Kaplan’s central claim about why desirable housing is expensive. "If you strangle supply, then prices will be high. If you unleash supply, prices will be low." — Brian Kaplan: His basic economic argument for deregulating housing construction. "What I want to do is get rid of something and replace it with something better because we’ve got finite resources." — Brian Kaplan: Kaplan uses Bastiat’s seen/unseen framework to defend development.

Implications: If policymakers relax zoning, parking, and approval barriers, housing could become cheaper, denser, greener, and more accessible. The stakes extend beyond rents to mobility, inequality, and family formation.