by Vanguard Staff
Ned Resnikoff argues that the housing affordability debate has entered a contradictory phase in which critics of new housing construction increasingly rely on abstract theory while dismissing a growing body of empirical evidence showing that expanded housing supply improves affordability.
Resnikoff frames his argument by invoking a long-standing critique of the economics profession. “The title of this post comes from an old joke about economists,” he writes, explaining that the joke reflects the idea that economists often privilege theory over real-world evidence.
While he acknowledges the humor, Resnikoff argues that the criticism no longer fits the discipline.
“Over the past few decades, economists have increasingly turned to empirical methods in their research,” he writes, leading to findings that “run directly counter to what you might expect from the output of a simple theoretical model.”
He points to a seminal example from labor economics to illustrate this shift. Referring to research by David Card and Alan Krueger on a minimum wage increase in New Jersey, Resnikoff notes that the study found “the minimum wage increase had not led to a decrease in the former state’s fast food sector workforce — despite what a simple ‘Econ 101’ supply and demand model might suggest.”
The findings became emblematic of the broader turn toward empirical analysis in economics.
Resnikoff situates contemporary housing debates within that same intellectual evolution. He writes that critics of housing construction often accuse pro-housing advocates of relying on oversimplified economic logic rather than observing conditions on the ground.
“People on the left (including myself) have often been critical of those who doggedly weight crude economic models over actual evidence,” he writes, adding that this critique is frequently leveled at housing abundance advocates.
Resnikoff calls the accusation “unfair,” writing that it becomes “more unfair with each year as empirical researchers uncover more evidence that building more housing leads to greater broad-based housing affordability.”
According to Resnikoff, the dynamic has now flipped.
“Ironically, as the empirical case for YIMBYism grows ever stronger, it is the anti-‘Econ 101’ crowd that is now falling back on airy theorizing and simple models,” he writes.
He argues that objections to non-empirical economics were never about methodological rigor but rather about outcomes.
“It turns out that their problem with non-empirical economics wasn’t the lack of rigorous real-world investigation after all; it was just that they would rather have everyone use models that are rigged to produce their preferred outcomes.”
As an example, Resnikoff highlights a recent working paper co-authored by Michael Storper titled Inequality, not regulation, drives America’s housing affordability crisis. He writes that the paper argues increased market-rate housing production will not make high-cost cities affordable within a reasonable time frame.
“The authors’ primary tool for doing this is a simulation of a hypothetical supply shock to six high-cost cities,” Resnikoff notes.
Resnikoff criticizes that approach, arguing that there is no shortage of real-world housing booms to examine.
“Over the past couple of years, Austin, Texas has seen both a significant spike in homebuilding and a precipitous drop in average rents,” he writes.
While acknowledging debate about the precise causes of Austin’s rent declines, Resnikoff says it is “certainly not too early to attempt some preliminary estimates.” He adds that research on rezonings in Auckland and Minneapolis is “already piling up,” with additional evidence expected from New York City’s recent zoning reforms.
Instead of engaging directly with those cases, Resnikoff argues, the paper relies on a model built around a small number of assumed inputs, including price elasticity, filtering rates and supply growth. While not dismissing modeling entirely, he says the authors use empirical research selectively. He points to repeated citations of a study claiming new market-rate housing can increase rents for nearby low-income residents.
“They fail to note that the paper didn’t adjust for inflation, and that doing so causes the observed effect to vanish,” Resnikoff writes.
He also challenges the authors’ dismissal of housing filtering, the process by which higher-income residents move into newer housing, freeing older units for lower-income households.
The paper suggests that households moving into vacated units may “experience higher housing cost burdens,” a claim Resnikoff finds unconvincing.
“If none of the recently vacated housing is actually becoming more affordable, why wouldn’t more people in the chain of moves stay put?” he writes, adding, “No one’s forcing them to move up the chain.”
Resnikoff identifies what he sees as the paper’s central flaw: a mischaracterization of housing supply advocates.
“Very few of the people they call ‘deregulationists’ think that regulatory reform on its own is sufficient to make cities like San Francisco affordable,” he writes. Drawing on his work for the Roosevelt Institute, Resnikoff argues that “regulatory reform is a complement to targeted public investment, not a replacement for it,” adding that zoning reform can make public spending on affordable housing and rental subsidies more effective.
He rejects portrayals of housing advocates as market fundamentalists.
“That has never been true,” Resnikoff writes, noting that California state Sen. Scott Wiener has long supported deed-restricted affordable housing. He also points out that some of the most prominent pro-housing local leaders support large-scale public-sector housing construction, including hundreds of thousands of new affordable units.
“In both its rejection of empiricism and in its reliance on hidebound stereotypes about YIMBYs,” Resnikoff concludes, “this paper feels more like a time capsule from last decade than a novel intervention into the housing debate.”
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Vanguard Staff said … “… relying on oversimplified economic logic rather than observing conditions on the ground.“
Keith Echols has repeatedly share with Vanguard readers his observations about housing resale pricing conditions on the ground in high housing demand communities where new housing has been added. He observed that realtors, when deciding on the price to list a resale house look to “comparables.” Interestingly enough property appraisers use the same system of comparables in doing their own work, as do the tax assessors in County offices nationwide. Keith explained the reality of new housing is that the cost per square foot is determined by construction costs, and those construction costs are invariably higher on a per square foot basis than either the construction costs or market valuations of existing homes on the community. As a result the realtors put new listings at a higher per square foot level than they would if there were no new homes in the comparables.
The natural pushback against Keith’s observations of the conditions on the ground is that increased price will depress demand and depressed demand will undermine the price increase. However, the cited research by David Card and Alan Krueger on a minimum wage increase in New Jersey, showed that the minimum wage increase had not led to a decrease in the former state’s fast food sector workforce — despite what a simple ‘Econ 101’ supply and demand model might suggest.
The unmentioned economist’s joke is “Sure it works in practice, but does it work in theory?”
Resnikoff is dead on in his critique. I’ve passed on here and to David several other analyses that also show fatal flaws in studies asserting that increased supply won’t lead to decreased prices relative to the status quo trend.