America’s Missing 15 Million Homes
American home building has slowed down significantly over the past 25 years. If the U.S. housing stock had grown from 2000 to 2020 at the same rate as it did from 1980 to 2000, there would be 15 million more homes today. This slowdown even occurred in Sun Belt cities like Phoenix, Miami, and Dallas, which were once considered “building superstars.” This decline is particularly happening in suburban areas with vast, empty land, where building should be the easiest. Yet these metros may have systematically restricted their growth through regulatory barriers that override market signals.
In “America’s Housing Supply Problem: The Closing of the Suburban Frontier?” Edward L. Glaeser and Joseph Gyourko analyzed housing construction across 44 major metropolitan areas from 1970 to 2020 to understand why markets that built over 50 million homes from 1950 to 1980 now struggle to add housing despite available land.
Key Takeaways:
- Building superstars stopped building. Growth rates dropped across Sun Belt metros, and by the 2010s, each had similarly low rates of housing supply growth.
- High prices no longer trigger more building: Expensive neighborhoods used to see the most construction, but this relationship weakened dramatically across most cities between 1970 and 2020.
- Dense areas are now building more relative to suburbs: Construction patterns have reversed, with dense neighborhoods now seeing more building than suburban areas with ample capacity. For example, Miami built 44% of new housing in desirable low-density regions in the 1970s, but only 12% by the 2010s
To investigate these patterns, the researchers constructed a database that tracked neighborhoods from 1970 to 2020. They wanted to measure how construction responds to price changes, but faced a problem: if you simply compare high-price neighborhoods to low-price ones, you can’t tell whether high prices cause more construction or whether a lack of construction causes high prices. They solved this issue by comparing neighborhoods that were similar in terms of location quality and past price trends, then measuring the amount of construction that occurred when current prices differed.
New housing growth rates have decreased and converged: Despite vastly different economies, Phoenix, Atlanta, Dallas, and Miami converged to identical 1.2% annual building rates. Since market forces typically create different outcomes based on local conditions, this uniform result suggests common factors are at work. Indeed, cities with stricter development rules—measured by the Wharton land-use restriction index—show declining responsiveness to housing demand.
Market signals have broken down in high-demand housing areas: For example, in Dallas suburbs during the 1970s, expensive areas consistently saw more new housing than cheaper areas. By the 2010s, expensive Dallas suburban areas no longer attracted significantly more construction. This represents a sharp decline in supply elasticity: when prices doubled in the 1970s, construction would increase by 72%; however, now the same price doubling generates only 7% more construction. Phoenix exhibited a similar decline in supply elasticity, from 65% to 10%, and this pattern was observed across most metropolitan areas between 1970 and 2020.
Running out of land doesn’t explain the building slowdown: If cities were simply running out of space, you’d expect dense neighborhoods to see even less construction over time, while sprawling areas with open land would see more, but the opposite happened. The relationship between neighborhood density and new construction was initially negative in the 1970s but shifted closer to zero or became positive over time in cities such as Phoenix and Atlanta. Phoenix still has a median density under 3.5 homes per acre, yet sprawling suburban areas there see relatively less construction than before.
The research suggests that regulations are a primary constraint on new housing production in high-cost areas. The Wharton index, which measures the strictness of land use regulation, reliably correlates with a shift toward less responsive housing supply. Cities with more educated workers—who often advocate for stricter rules—also exhibit this pattern. In short, America’s most productive housing markets systematically restricted new housing supply, pricing out the working families they once served.