Association for Public Policy Analysis & Management

Researchers and policymakers widely acknowledge that housing affordability has reached a crisis point in most large U.S. cities—and the primary culprit, in most economic analyses, is the inability of supply to keep up with demand. At a high level, the evidence supports this conclusion. Greater density, more stringent regulations, and growing homeowner opposition—all of which have made it harder to build—are associated with higher prices, both over time and across metropolitan areas. At the local level where these policies are created and implemented, however, we argue that this conclusion is insufficient to the point of futility.

If we are concerned with housing supply, what outcome should we be targeting? More units per capita? Per household? More square feet? More quality-adjustedsquare feet? Is housing located in the city center equivalent to housing located at the periphery? The urban literature is mostly silent on these questions. As a result, we know a lot about aggregate growth in housing units across metropolitan areas and very little about how well those units serve the population withineach metropolitan area. Our study unpacks these more policy-relevant dimensions.

The paper begins with a formal accounting of housing supply at a local level within the City of Los Angeles using a rich database of building permits over multiple decades. Rather than simply count the number of housing units, we estimate a multi-dimensional distribution of housing supply nonparametrically, revealing the variation in geography, quality, and quantity using several different measures. With this new understanding of housing supply, we then pinpoint the exact locations and drivers of the housing shortage, showing where and when different types of housing have been constructed and renovated. We document how gentrification, filtering, land-use regulation, and preferences have shifted over timeand in particular since the recovery from the housing bust of 2008, and we conclude with implications for policymakers to better target their interventions to deliver the type of housing that residents need in the locations where it would most benefit society as a whole.