by David M. Greenwald
ARLINGTON, Va. — Restrictive zoning, regulatory delays and years of insufficient housing construction are driving Americans’ housing affordability problems, according to a new report that argues subsidies and other forms of financial assistance cannot solve the underlying shortage pushing rents and home prices higher.
The American Consumer Institute, in its newly released report, The Role of Housing in the Affordability “Crisis,” argues that housing has become an increasingly severe burden because communities have constrained the construction of new homes, leaving renters and prospective homeowners competing for an inadequate supply.
“Higher housing costs are driven not by broad economic decline, but by supply constraints resulting from restrictive zoning, regulatory barriers, and limited new construction,” the institute said in announcing the report.
The findings add to a growing policy debate over whether governments can make housing substantially more affordable without allowing significantly more homes to be built.
While lawmakers have increasingly turned to rental assistance, subsidies, rent regulation and restrictions on institutional investors, the institute argues those approaches largely redistribute or limit housing costs rather than reducing the underlying price of housing.
“While many policy responses seek to reduce out-of-pocket costs through subsidies, rental assistance, or restrictions on who can purchase and invest in housing, these approaches do not reduce the underlying market price of housing,” the institute said.
The report concludes that the most durable solution is to attack the shortage directly by allowing more housing to be constructed and reducing the regulatory and financial obstacles that make development more expensive.
“Expanding housing supply and reducing barriers to new construction are necessary to address high prices and improve how Americans experience affordability,” the institute said.
Housing represents a particularly difficult expense for households because families have relatively little flexibility to avoid it.
“Housing, in particular, is an outlier from an overall positive trend,” the report states, calling it “one of the largest and least flexible components of household budgets.”
That distinction is central to the institute’s analysis.
Rather than concluding that Americans face an across-the-board collapse in affordability, the report argues that inflation-adjusted income and purchasing power have generally improved while certain essential expenses — most notably housing — have moved sharply in the opposite direction.
Housing costs therefore can leave households feeling financially squeezed even when their purchasing power for other goods has increased.
The report’s consumer spending data underscores the magnitude of the problem.
Inflation-adjusted average consumer spending increased 18% from 1984 to 2024, according to the report, with housing responsible for approximately half of that increase. Health care accounted for another quarter.
Housing also increased as a share of spending across every income group examined, while the shares devoted to food and transportation generally declined.
The burden does not fall on households in exactly the same way.
For the lowest-income Americans, rising rental expenses were the largest source of increased housing costs. For middle- and higher-income households, the costs associated with owning a home became increasingly important.
But the report cautions against treating renters and homeowners as participants in entirely separate markets.
Research examined by the institute found that rental and owner-occupied housing are interconnected, with properties moving between the two markets as interest rates and economic conditions change.
“As a result, policies affecting one segment of the market inevitably influence the other,” the report states.
That connection, the institute argues, makes increasing the overall housing supply critical for both renters and people trying to purchase homes.
The report cites research finding that housing regulations effectively increase the cost of new construction and that adding homes to the market moderates price increases.
“Taken together, these papers confirm the growing consensus that making housing easier to construct will increase the supply and bring down costs,” the report states.
The institute also points to substantial agreement on that issue across organizations that frequently differ on economic policy.
Pew Research, the Bipartisan Policy Center, Urban Institute, Congressional Joint Economic Committee and Center for American Progress have identified restrictive zoning, density limits and permitting requirements as important contributors to high housing costs, according to the report.
“These constraints limit the quantity of housing that can be built and push market prices higher by keeping supply artificially scarce relative to demand,” the report states.
The report points to reforms allowing a broader range of lower-cost housing, including accessory dwelling units, microapartments and manufactured homes.
It also cites proposals to make public land available for housing, expand access to development capital and improve housing financing as mechanisms for lowering the costs that ultimately get incorporated into rents and home prices.
The institute draws a sharper distinction when examining government programs designed to help households afford housing that remains expensive.
Rental assistance and vouchers can provide significant relief for the households receiving them, the report acknowledges, particularly for lower-income renters struggling with housing costs.
But the institute argues those policies should not be confused with measures that lower housing prices themselves.
“While these policies can reduce out-of-pocket costs for recipients, they do not address the structural drivers of market prices and, absent supply expansion, do little to reduce overall housing costs,” the report states.
The report is similarly skeptical of rent control as a broader affordability strategy.
It cites research into San Francisco’s expansion of rent control following a 1994 policy change, which found the policy reduced displacement by making tenants in rent-controlled apartments less likely to leave.
But the research also found landlords responded by converting rental properties to other uses and removing units from the rental market.
“The result was a reduction in the supply of rental housing and higher rents for units outside the rent-control system,” the report states. “In other words, rent control protected current tenants but made housing less affordable for future renters.”
The institute also pushes back against efforts to make institutional investors a central explanation for escalating housing costs.
Research cited in the report found institutional investors have reduced homeownership rates in some markets and can increase home prices while decreasing the number of homes available for purchase.
At the same time, the research found institutional investors can increase rental housing supply and reduce rental vacancies, with one study finding that their presence helped moderate rental prices.
The institute argues those competing effects demonstrate the danger of focusing housing policy primarily on who owns existing homes rather than how many homes are available.
“Policies that target symptoms rather than underlying supply constraints risk producing unintended consequences while leaving affordability largely unchanged,” the report states.
The report ultimately frames the affordability problem as one of scarcity: Too many households are competing for too little housing in communities where zoning restrictions, regulatory delays, financing difficulties and other barriers prevent supply from responding adequately to demand.
Targeted assistance can still protect households facing immediate hardship, according to the report, but such programs cannot by themselves make the overall housing market less expensive.
“If the goal is to reduce the actual market cost of housing, the path forward is relatively clear and, notably, widely agreed upon,” the report concludes.
That path, according to the institute, means expanding housing production, reducing regulatory obstacles and improving access to the land and capital necessary to build.
“Addressing the cost of housing is key to improving affordability for American consumers,” the American Consumer Institute said.
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