The surprising barrier that keeps us from building the homes we need

Vice President Kamala Harris has proposed an ambitious plan to build more: “Right now, a severe housing shortage is part of what is driving up costs,” she says. said last month in Las Vegas. “So we will cut red tape and work with the private sector to build 3 million new homes.” Her proposals include a $40 billion innovation fund to support housing construction.

Former President Donald Trump has also called for relaxing regulations, but mainly emphasizes a far another way to tackle the housing crisis: mass deportation of immigrants who he believes are flooding the country, and whose need for housing he believes is responsible for the enormous price increase. (While a few investigations show some local impact on the cost of housing from immigration in general, the effect is relatively small, and there is no plausible economic scenario in which the number of immigrants in the past few years is responsible for the magnitude of the increase in house prices and rental prices in much of the country.)

The opposing positions of Trump and Harris have implications not only for the way we try to lower house prices, but also for the way we view it the importance of building more and faster. Moreover, this focus on the housing crisis also highlights a broader problem with the construction industry in general: it has been technology-averse for decades, and has become less productive over the past fifty years.

The reason for the current rise in housing costs is clear to most economists: a lack of supply. Simply put: we are not building enough houses and apartments, and we have not been doing so for years. Depending on how you count it, the US has a deficit of approx 1.2 million Unpleasant more than 5.5 million single-family homes.

Permitting delays and strict zoning regulations create enormous obstacles to building more and faster buildings – as do other widely recognized issues, such as the political power of NIMBY activists across the country and a persistent shortage of skilled workers. But there’s also another, less discussed problem plaguing the industry: we’re not very efficient at building, and somehow it seems to be getting worse.

Together, these forces have made it more expensive to build homes, leading to price increases. Albert Saiz, a professor of urban economics and real estate at MIT, calculates that construction costs account for more than two-thirds of the price of a new home in much of the country, including the Southwest and West, where much of the construction occurs. Even in places like California and New England, where land is extremely expensive, construction represents 40% to 60% of the value of a new home, according to Saiz.

Part of the problem, Saiz says, is that “when you go to a construction site, you see the same methods that were used 30 years ago.”

The productivity problems affect the entire construction industry, not just the residential construction sector. From clean energy advocates dreaming of renewables and an expanded electric grid to tech companies racing to add data centers, everyone seems to agree: we need to build more and do it quickly. However, the practical reality is that this is so costs more and takes more time to build something.