Houston, You Have a Problem: How Large Cities Accommodate More Housing

Abstract

We document the spatial distribution of new net housing units in large and growing metropolitan areas from 1970 to 2010. While fundamental to both urban and housing economics, little is known about how housing supply evolves to accommodate growth as metropolitan areas expand and mature. We find that metropolitan areas with ample proximal greenfields add new housing differently than those whose periphery is no longer a substitute for more desirable locations in the core. Interestingly, we see patterns in "pro-growth" MSAs that echo those of "highly-regulated" MSAs, but lagged several decades. The empirical results point to falling elasticity as a function of growth, suggesting that rising prices are an inherent feature of large and growing metropolitan areas. This secular trend poses potential challenges to many urban housing policies aimed at enhancing affordability.