Some Brief Thoughts on Housing Supply and Policy

Abstract

In this short piece, I make several considerations about the impact of housing supply on housing prices, affordability, and macroeconomic aggregates. I elucidate the key interactions between supply and demand that generate macroeconomic problems and lack of affordability, and emphasize the distinction between short run and long run housing supply. My main conclusions are not new: policymakers should be aware of the Tinbergen rule. We should use multiple tools to address the multiple problems arising from housing markets. By solely focusing on one dimension we may miss big on all objectives. I argue that countercyclical supply-side policies are particularly damaging, and advocate the use of better data-driven mortgage underwriting models that go beyond mark-to-market and try to forecast future equilibrium prices. Finally, I make an argument for a return to ambitious master-planned city building endeavors in our most expensive cities.