Elasticitiy moderates the effect. It doesn't reverse it. Increasing housing supply decreases housing costs. A lot of people are venally or ideologically motivated against accepting this. Our housing crisis is a political choice. (Note: I'm a homeowner.)
Elasticity is the relationship between demand and supply, and there are actually very rare instances where it can be negative (where demand increases with price).
These are called Giffen goods.
https://en.wikipedia.org/wiki/Giffen_good
Explanation (that I remember)
Inelastic demand is when a good is demanded so much, that an increase in price has little affect on the total quantity (people still demand it, think like addictive substances)
So a perfectly inelastic product would be a straight line where any amount is demanded at any price.
So having the curve keep going it would get a positive slope, where higher price makes demand go up.
If I remember the example I was given was food during a famine. Supply is already low, but an additional pressure on price is the known shortage. The idea being that as the price goes up people see it as harder to get.
It’s been so long since I studied the subject so I might have gotten some things wrong here.
The terminology is actually split; sometimes they're called Giffen goods and sometimes they're called Veblen goods.
The two types have identical behavior, so there's no good reason to have two different names, but in concept Giffen goods are something poor people buy, while Veblen goods are something rich people buy.
That’s the story of the last 10 years among certain types that keep regurgitating obviously wrong concepts.
The urban orthodoxy is around demand rationing. Supply-side arguments are incredibly new. The evidence cuts in one direction. (Unless we want a hukou system.)
It's built upon untrue assumptions
- infinite buyers / sellers
- perfect information
- no switching / transaction costs
---
The article itself has 3 different year ranges provided so I'm not sure how you can use it as evidence. Plus overall the rent is still up by a lot since 93% - 4% is still at least 80%.
- Rents increase by 93% from 2010 to 2019
- Housing increase from 2015 to 2024 (this overlaps with when rents increased ...)
- Rents fell from 2021 to 2026 by 4%
"Lol economists are dumb they think humans are robots!"
No they don't. Sorry, we won't be throwing away an entire field of human endeavor based on a straw man caricature that isn't true.
We don't call physicists dumb and throw out all their ideas because the real world isn't a perfect vacuum either, don't be silly.
- the main input (land) is also an output, so when the price of the output goes up, so does the value of the input.
- economies of scale don't really work, due to the impracticality of transporting the good (houses) and fitting the good inside a machine (in house "factories", normal workers go inside the house and work on it by hand; not a lot changes compared to traditional construction)
- more supply in one area increases the value (and therefore demand) in that area, so it's not actually clear-cut whether building more would reduce the price more than it increases it, at first glance.
Correct. That's why when there's more housing you're more likely to find what you need.
https://www.theatlantic.com/magazine/archive/2025/03/america...
No amount of evidence will convince these people, because they already made up their mind ahead of time: their ideology says the market can't help, so the market can't help, period. Any evidence to the contrary is a plot by billionaires or something.
Maximizing supply can mean other things than building like taxing unoccupied homes by large amounts making them unpalatable to own as a second (or higher) home, thus putting them back on the market. However these aren't all good because obviously our economy deals with more effects than just simple supply and demand, like maximizing the amount of loans given to people wanting housing regardless of the ability to repay is known to be a bad idea.
If you throttle the supply you can clearly control the price and the people you're talking about believe there is a concerted effort to control that supply. This can happen directly (choosing not to build as soon as land is available to build on) or indirectly (e.g. politics, mass media influencing people to vote to not increase supply).
What people generally hate is production of essentials not being maximized which would give us the actual lowest price, and maybe we as a society should be maximizing that supply to arrive at the lowest cost for a given house with given features.
And then the rebuttal to that is usually "tough shit lol" which is why people coming out with simple supply and demand replies are generally seen as derisive.
We kinda do, through farm subsidies.
> "Rents fell. In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346)."
Of course having more housing should, all things equal, lower rent. But all things certainly weren't equal, especially during this time period.
For comparison, in San Francisco December 2021, the median one bedroom was $2810. In San Francisco March 2026, it was $3597, an increase of 28%.
We’re seeing a reversal in trend when SF is hot again and Austin is not. So not exactly a straightforward comparison. It could explain the SF-> Austin and back trend.
All three of the five things most economists say about house building - and each one will hit house owning voters hard making it hard to replicate.
But none the less a triumph of common sense :-)
In a negative way?
These things push against that.
Really, I'd prefer not having policies that tend to push up housing prices or discourage people from moving, but here we are, those types of policies are common.
Which is myopic.
As a homeowner, I want cities to be livable and affordable for those who want or have to live there. I don't care if the value of my home changes one cent. It's honestly kind of useless, because it's not like I can sell the house and buy a nicer one. All the houses are more expensive so it's always going to be a lateral trade. It only helps if you sell and move to a lower cost of living area.
It's kind of a sham that we have been conditioned to treat housing as an investment. Housing is where people live, it shouldn't be a commodity to be hoarded.
It's a minority of people who are ok never capitalizing on their home value.
The only people in the low income neighborhood I grew up in that could afford to weather this wave of out-of-state and investment banking homebuyers were those who were of retirement age and had their property taxes “frozen” at an affordable level.
Going down might be nice, perhaps I could buy the neighbor's house and combine the lots and make a nice set of row houses ...
House go up being important is really only needed if I'm using it for leveraged appreciation and doing something like dragging the cash out like a piggy bank; but that's a tiger that will have to be dismounted eventually.
If you are in your terminal home, you also want low prices until the week before you eventually sell your house, as Texas has a high property tax rate to make up for the lack of state income tax.
In Melbourne I've never found a good source for this, only general averages; and my suspicions are that we just build shitboxes and claim the rent is lower on average, capturing something like shrinkflation rather than affordability.
I like the approach of making downtowns walkable and having a bit of parking at the periphery of downtown, along with good public transit. Encourages people to use public transit to get to town in the first place. Downtown residents can use transit or a zipcar or equivalent when the need to get out of town, instead of devoting a ton of space downtown for storing their cars.
Not sure if that approach is really practical, but if it can be made to work it is much nicer.
To be fair, I am boycotting the (similar) underground garage over at Springline because they're clearly made only for people in Range Rovers or whatever. They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.
There's a big disconnect from people building new projects and local governance, and it's growing. When tech companies started even providing buses for their employees, because local government is too fractured and incapable of running needed bus routes, and can not coordinate across county and city borders, local activists were extremely upset that tech workers were not driving their personal cars and instead using environments-saving and traffic-reducing transit.
Are you sure it's the ticket machines? Around here, the ticket machines have stayed the same, but it's now impossible to use them without stopping the car and getting out, because car manufacturers have decided I need eight inches of empty space between myself and the side of the car.
What a lot of the new buildings in Austin are doing is putting an attached garage directly behind a 4 + 1 mixed use development - the street-facing facade is the apartments and shops, and the garage is directly behind (and usually attached) to the apartments. You basically never see them.
A better comparison would be ATX against San Jose.
Just like how the "rich" residents of Santa Clara county know that you want to live in Campbell, Los Gatos, Menlo Park, Los Altos, Loyola, etc, similarly rich Texans and Austinites live in the Hills.
The reality is the residents of Menlo Park and Rob Roy don't want your type, and in a lot of cases tend to be the same people as there aren't many places left where you can trail run, bike, eat Michelin star ramen, and not pay income tax.
Just because we make good money in tech, it doesn't make us "them". I highly recommend reading the works of Pierre Bourdieu with regards to cultural capital.
The majority of it is not Bel Air...
The median household income is $210K [0] and it's the same demographic. A Menlo Park home address that is on the correct side of the 101 opens the same doors in the Bay that a Bel Air address does in Los Angeles or an Austin Hills address does in Austin.
Menlo Park was never a "middle class" town. The 101 was always the (literal) redline.
Rich doesn't equal conspicuous, especially in the Bay Area.
[0] - https://www.census.gov/quickfacts/fact/table/menloparkcityca...
The old money (rich before tech) to the West of 280 in Woodside and Portola Valley.
Not sure the idea of housing being an asset which endlessly accrues value is good for anybody involved, long-term. Open to disagreement, though! I’m no economist.
They want to flow as much as possible - so if there are unlimited building spots you get a smattering of various options being built as they all find there niche.
If the building lots are rare, then they all will be built into the most expensive possibility.
Very broadly speaking, people mis-estimate effect sizes in economics by orders of magnitude. Induced demand is just their foothold to claim an effect exists, before they go about claiming the effect size they want to see.
No one is complaining about a housing shortage today in buffalo which used to have twice as much housing stock as it does today, because the demand simply isn’t there now.
New businesses the sprout up that market themselves certainly induce a bit of demand, but more lanes and stoplights doesn't exactly motivate people to want to go somewhere.
The idea that supply and demand don't apply to housing is quite popular:
https://www.jstor.org/stable/27397156
And the very few academic articles that try to refute housing supply lowering prices get a lot of press:
https://hellgatenyc.com/take-that-ezra-klein/
Even when it's not peer-reviewed and contradicts a ton of more serious research attempts, a bid of research which rarely gets popular press coverage.
It's like climate denialism, there's huge demand for denialist positions and very little research to back it up, so the press does not reflect the research.
Yeah, and when we add lanes to roads, the average speeds increase and commutes get shorter. Right?
Also, if the government gives me $1 billion, then I'll be rich. But what happens if the government gives everyone $1 billion? Everyone will be rich, right?
It's a win-win for our tenants. Prices seem to be stable and there's no rush for them to lock down a house RIGHT NOW.
It's sure not good for my bottom line as a landlord for them to keep adding homes and keeping rates up. But it sure seems like a no brainer for society at large.
A stable market is great; as you can find good deals with some sort of certainty, and focus on where you can actually build value (rehab, etc).
This has been studied to death. But just like soybean farmers in Idaho voting for tariffs on China it seems a category of urban renter is more wedded to ideology than self interest.
The Austin metro area's population is up [1][2]. Austin's GDP is up [3]. Migration per se doesn't explain a phenomenon that is robust across cities, countries and centuries.
[1] https://www.macrotrends.net/global-metrics/cities/22926/aust...
[2] https://en.wikipedia.org/wiki/Austin,_Texas#Demographics
The Austin metro area's population has been monotonically increasing [1]. Increasing housing supply decreases prices. If you want to reduce housing costs, flood the system with housing.
[1] https://www.macrotrends.net/global-metrics/cities/22926/aust...
Increased supply lowered prices for the same levels of demand?
Seems unlikely.
interest rates for construction loans, reduced funding, labor and material costs, all contribute to the amount of housing built.
there is a bond being debated in the ca senate now that will help by giving loans for construction.
https://calmatters.org/politics/2026/01/2026-housing-agenda/
Small incremental changes probably just get absorbed without visible impact on rents.
I put this question to grok; its response:
> Unfortunately, Australia's legal, regulatory, financial, and practical systems make this extremely difficult (bordering on impossible at any meaningful scale).
Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
that is why we build suburbs - they get anound this by being right next to a place with everything you want in a city
Similarly, the tested and proven solution to homelessness is providing housing up front. Don't have any requirements (employment, sobriety, etc) blocking housing. Those things are easier to achieve with a roof over your head.
Maybe if you flood the market with 30% more housing units like Austin you get the Econ 101 effect. On the other hand, apartment owners realized intentional vacancy is a profitable strategy, which alone seems to defy that basic interpretation.
I think that might not be the right cause and effect relationship. The actual cause is increased demand. This creates both the increased pricing of existing stock and an incentive to build new stock.
They can only get away with that when there is a housing shortage.
It can, but not in isolation.
It requires a couple additional variables such as population demand (rate of growth of Austin has reduced since the COVID boom [0]), existing stock (Texas had a building boom and bust in the 1980s [1] that decoupled it's housing market from the rest of the US), and a shift from buying to renting.
That said, the peers I have who work in professional real estate (not realators - as in actual MDs for REITs or multi-generational landlord families whose parents went to school with Governers and mayors) are starting to shift away from real estate to equities because of headaches around succession planning and reduced margins.
What is ending up happening is megacap REITs like Equity Residential, Essex, Avalon, etc are buying out older groups, taking stakes in new developments, and shifting away from selling condos to perpetually leasing. At their size they can afford to have significant amounts of unleased units becuase they would have made up the cost via higher rent on leased units, tactically building high margins condos and SFHs in high appreciation geographies, or loss harvesting in order to subsidize commercial buildouts like data centers.
[0] - https://www.bizjournals.com/austin/news/2026/01/28/austin-be...
[1] - https://www.nytimes.com/1986/09/14/business/john-connally-s-...
The mechanism by which new construction drives down rents is that people that need a new apartment are in less competition with existing residents in older worse apartment buildings.
So the newcomer from SF moves into the expensive new apartment, which means that there's less competition for decades old apartments, which means that when one of those is vacated there is less price appreciation on that product.
If there is a scarcity of apartments what happens is that when a decades old apartment is vacant it is filled by a wealthy newcomer and the landlord increases the rent accordingly.
So what did? Likely COVID. The _only_ way to decrease the housing prices is to decrease the population. As proven by countless cities, including the world's most liveable Copenhagen.
So does my prediction hold for Austin? Let's see.
Austin TX population in 2019 (ACS estimate, data series ACSDP1Y2019.DP05): 979263.
2021 (ACSDP1Y2021.DP05): 944658
2023 (ACSDP1Y2023.DP05): 979700.
2024 (ACSDP5Y2024.DP05): 979539.
So yep, my prediction holds true. The housing prices in Austin were stagnant because its population decreased during COVID and barely recovered to pre-COVID levels.
Want another prediction? Seattle's home prices will fall down, because its population is now (likely) decreasing. Not because of a rush of new construction. We'll see updated population released stats in April.
Even adjusting for inflation, and even if the measurement of inflation is decent, it would still need to go down by another 20%.
nemomarx•1h ago
I'm sure the analysis is welcome though and I hope policy makers try to learn from this. We could densify most american cities quite a lot more.
seanmcdirmid•1h ago
nemomarx•1h ago
seanmcdirmid•1h ago
bryan_w•48m ago
atomicnumber3•1h ago
seanmcdirmid•1h ago
0_____0•1h ago
matheweis•1h ago
Read the article and the peer comments here; Austin’s boom came about from reducing regulatory constraints.
Nationally remove the artificial restrictions and the supply side will fix itself.
seanmcdirmid•55m ago
shimman•33m ago
https://www.youtube.com/watch?v=LVuCZMLeWko
As renown corporate welfare recipient Bezos would say: "your margin is [our] opportunity."
If the only thing stopping development is that rich developers want to make more money, then maybe we should get rid of the rich developers and let the public decide what to build. It couldn't be worse and it'd be 20-60% cheaper too.
trollbridge•28m ago
postflopclarity•1h ago
standardUser•1h ago
JumpCrisscross•1h ago
Last time I did the back-of-the-envelope math, financing permitting delays in San Francisco added 10% to the cost of new housing [1]. (Note: not the cost of permitting. Just the cost of financing the delay.)
This is deadweight loss that everyone in the transaction wins from eliminating. One could absolutely see lower prices and higher developer margins if this waste were cut.
[1] https://news.ycombinator.com/item?id=38664780
strbean•1h ago
Nobody ever thinks of the poor banks!
JumpCrisscross•1h ago
I thought about that. But a bank would rather lend in lots of high-confidence, low-duration deals than a small number of high-margin deals. The only people who lose when housing is built are incoment landowners. Because prices go down.
lo_zamoyski•1h ago
thaumasiotes•10m ago
nzeid•53m ago
amelius•1h ago
cg5280•1h ago
JumpCrisscross•1h ago
Which is self interested. The paradox is renters being turned against their own interests by large landlords pitching anti-gentrification.
lovecg•59m ago
solid_fuel•51m ago
In a system where those with more capitol have more power, homeowners are the powers that be. They're more likely to vote and have more money for discretionary spending - like donating to politicians.
calvinmorrison•46m ago
solid_fuel•23m ago
epistasis•49m ago
The greatest inequality difference is that between those with housing assets and those without. Yes the 1% are a problem but they are not the reason that young people can no longer afford housing without generational wealth, that's all due to the seemingly normal guy that's enforcing a class system based on home ownership versus non-ownership.
shimman•38m ago
TulliusCicero•1h ago
lelandfe•59m ago
dmix•58m ago
Although it's not just NIMBY. There's a million rules about building housing and developing land from zoning, environmental, indigenous, or social ends. Which are arguably luxury self-benefiting priorities for people who already own houses. Plus all the activists who think the government can both make development extremely expensive via endless rules while affording to fund mass government housing at the same time.
CharlieDigital•38m ago
Namely, when new housing is added, there are infrastructure considerations and corresponding expenses that translate to higher taxes. Civil planners have formulas for how much the student population will grow based on the housing density/type.
Schools built on parcels based on 1970's population now have to expand to fit more students or the township has to find and acquire new land to build a new school.
That requires raising taxes for bonds. A new school is several million dollars and then hiring staff. NJ has a legal limit of 25:1 in elementary. Add 100 students and you add at least 4 teachers that have to be supported by taxpayers.
If you ever look at your municipal tax bill, you will find that education is going to be the biggest expense by far.
On top of that, roads may need to be widened. New roads have to be built and maintained. Municipal staff may need to increase.
Some services may actually benefit from economies of scale (waste collection). Most will not.
Imagine you bought a house in 1970 (i.e. my development) and you were paying $1000 annual property taxes. Now your property taxes are $12000 because of the increased spend on infrastructure and increased assessed value. You're a retiree and you've paid taxes for 2 or 3 generations of students. You live on a fixed income and your property taxes are a higher and higher proportion of your income. What do you do? Mortgage the house to pay taxes to fund more growth?
The problem is exacerbated because obviously people want to go where the good schools are, where it's low crime, good infra, easy access to transportation. That drives demand and puts pressure on services while also raising taxes to pay to fund municipal bonds for growth.
End of the day, my personal belief is that housing is a right. But I can also see why middle class folks, retirees end up pushing back when they get the bill in the form of increased property taxes. I've lived in my house 10 years now and my taxes have gone up ~$3500 in that time. Every school in the township had to expand to meet population growth with the additional units. Sure, my home value went up as well, but I can't cash that out. I can't imagine how it feels for retirees that are living in a family home here.
lo_zamoyski•1h ago
[0] https://www.pbs.org/newshour/politics/watch-trump-says-he-wa...
BurningFrog•49m ago
There are a lot of people with some power, which they use as they see fit. It all adds up to marginal and pseudo-random changes, as the state drifts toward... wherever it's going.
pibaker•43m ago
gknapp•40m ago
mountainriver•41m ago
My hometown has had a huge push to add more housing to make things more affordable. What happened? Rents went down for a couple years then right back up. Except now the city has a bunch of more soulless condos and is horribly congested.
Sometimes preserving things and keeping them nice and simple even if it’s costs a bit of a premium is better.
orangecat•33m ago
So there were a bunch of people who wanted to live there and now can.
triceratops•17m ago
ajross•33m ago
The first bit is a taste thing; obviously lots of people view modern sprawl as "soulless" too.
But the latter point is just plain wrong. Dense housing IMPROVES traffic congestion and shortens commutes, always, everywhere, markedly. And it's for a bleedingly obvious reason: pack people in closer together and they don't have to travel as far to get where they're going. QED.
What you're imagining is some kind of fantasy hometown, which never increased in population and whose economy never developed. I mean, it's true. Forgotten ghost towns have very little traffic and quirky soulful architecture, c.f. Detroit. Everyone agrees that's a bad thing, though.
pottertheotter•6m ago
"Density at all costs" ignores a huge set of tradeoffs that are equally as damaging to a city. Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc. These are the things that make a city work in the long term.
I’m a big proponent of building more housing. But a lot of it is being doing in very short sided ways that lead to huge externalities.