Folk Economics and the Persistence of Political Opposition to New Housing

Abstract

Political scientists commonly attribute the underproduction of housing in US metropolitan areas to unequal participation and collective action problems. Homeowners, who are organized, repeat players in local politics, mobilize against proposed projects nearby, while renters, who would benefit from more housing, benefit too diffusely to mobilize for it and may not even vote in the jurisdiction. Using data from two nationally representative surveys of urban and suburban residents, we posit a further cause of the housing shortage: public misunderstanding of housing markets. Through vignettes describing a 10% shock to regional housing supply, we find that only about 30–40% of respondents believe that additional supply would reduce prices and rents. Using a conjoint design, we find that this “Supply Skepticism” is robust to question wording, stipulated counterfactual assumptions, and the cause of the supply shock. It also appears to be specific to housing: respondents generally gave correct answers to questions about supply shocks in other markets. Finally, we find that while nearly all renters and even a majority of homeowners say they would prefer home prices and rents in their city to be lower in the future, support for state preemption of local land-use restrictions depends on beliefs about housing markets. “Supply skepticism” among renters undermines their support for home construction, while some homeowners appear to be more supportive of new development than they would be if they held conventional economic views.

Keywords: housing, folk economics, housing supply, NIMBYism, survey research

JEL Classification: R31, H7