Folk Economics and the Persistence of Political Opposition to New Housing

Abstract

Why is housing development so severely restricted in U.S. cities and suburbs? Political economy scholars often point to local politics, where homeowners can exploit discretionary planning processes to oppose new developments while renters remain indifferent due to the diffuse benefits of increased supply. One proposed solution has been to elevate land-use authority to the state or regional level, thereby circumventing NIMBYism and leveraging voters' stated preferences for lower prices by increasing housing supply. However, in three surveys of urban and suburban voters, we find a significant barrier: although many desire lower prices, only 30-40\% believe that a higher supply would lead to this outcome. This skepticism towards the ``supply and demand'' principle in housing starkly contrasts with respondents' otherwise accurate understanding of other markets. Instead, for housing, there is a strong, stable ``folk economic'' belief blaming high prices on landlords and developers. We discuss the implications of these findings for state-level housing-supply expansion plans.

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

JEL Classification: R31, H7