When 1 + 1 = Zero: How NIMBYism Fosters Housing Skepticism

December 12, 2022

While research has shown that new homebuilding can bring an immediate benefit to local housing affordability, a new survey study by University of California scholars Clayton Nall, Chris Elmendorf, and California YIMBY alumni Stan Oklobdzija finds that people tend to be skeptical about the effects of housing supply on prices, even while correctly intuiting these effects in other markets, like food, or cars.

Key takeaways:

  1. From two national surveys of roughly 2,500-3,000 US adults in urban and suburban areas, “only about 30–40 percent of respondents believe that additional supply would reduce prices and rents.” 
  2. However, “respondents generally gave correct answers to questions about supply shocks in other markets”– including grain, cars, and labor.
  3. The political implications are clear: “support for state preemption of local land-use restrictions depends on beliefs about housing markets.” The authors hypothesize that “Supply Skepticism may be an outgrowth or manifestation of a zero-sum worldview.”

Recent studies by Mast (2019) and Pennington (2021) have modeled and observed the proximate price impacts of new market-rate housing development, finding that new market-rate homes make the local neighborhood more affordable by enabling migration chains that reduce competition for older rental housing stock. 

An academic consensus has long held that exclusionary zoning and permitting laws in more affluent municipalities make housing less affordable by restricting this process, effectively guaranteeing property owners a larger share of rental income from workers’ wages and stunting economic growth

A new survey study by Nall et al (2022) explores the disconnect between economic consensus and public opinion on increasing housing supply.

With two national surveys of adult homeowners and renters in urban and suburban Census zip codes, the authors find a prevalence of what they call Housing Supply Skepticism. At the same time, the survey data demonstrates “that the public understands the implications of supply and demand in markets for agricultural commodities, for labor, and even for cars, a durable consumer good that, like housing, trades in new and second-hand markets.” 

But Nall et al argue that this inconsistency is not the result of ignorance; rather, they express coherent folk-economic beliefs. As the authors explain, this squares with the general finding in studies about economic beliefs that “the mass public tends to personalize and moralize economic phenomena.” People tend to infer that price increases are the result of individual deceit and market manipulation, not real shortages. 

Ultimately, this may just be a part of human nature, a pattern which “reflects a human mind that is highly evolved for cooperative behavior in small groups—and thus very good at detecting intentions and effort, and at policing turncoats—but that has little aptitude for systems-level thinking about indirect or equilibrium outcomes from an aggregate of interactions.”

The survey questions focused on “the perceived price effect of an exogenous 10 percent increase in the size of a metropolitan region’s housing stock.” The first survey asked respondents: “Imagine that cities and towns across your metropolitan region remove development restrictions. This causes…Consider a rental unit in {City}. Assume that its fair market rent in five years would be {Price}/month if development restrictions did not change. Do you think the same home would rent for more or less than that if the removal of development restrictions caused a 10 percent increase in your metro region’s housing stock?”

In order to rule out noisy survey artifacts “or blind guesswork,” the survey study randomized the format of the question and the order of response options, along with a free-response section. The survey also presents similar scenarios for other goods and services.

Thanks to this survey design, the data strongly suggests Supply Skepticism is a prevalent and sincerely held attitude. In the first survey, less than a third of respondents predicted that a 10 percent supply increase would lower rents, while 40-45 percent believed it would increase prices. The second survey had roughly similar results, and found that Supply Skeptics tended to be more resistant to state preemption of local land use laws that could increase housing supply.

The survey data also shows that most respondents had coherent and entirely different beliefs about other markets: “the ‘weakly skeptical’ share of responses to our questions about trade, used cars, labor markets, and commodity markets is far smaller (15 percent to 50 percent) than the weakly skeptical share of responses to the housing supply-shock scenarios (60 percent-70 percent).” Used cars stand in particularly stark contrast, as a full 85 percent of respondents predicted that a negative supply shock would increase prices.

Further surveying found that many respondents’ mental models of housing markets generally agreed about causal mechanisms, but disagreed about their outcomes. Supply Skeptics tended to believe that loosening zoning restrictions in their region would increase new home building in less-expensive neighborhoods. 

However, the academic consensus predicts the opposite: “We would expect developers in all scenarios to target higher-priced neighborhoods, and that homes would become available in less-expensive neighborhoods, at somewhat lower rates, via chains-of-moves induced by new construction in expensive places.”

One silver lining in the study is that predictions about the price effects of increased homebuilding had no correlation with responses about blame for price increases. The authors hypothesize that it is possible for blame to be ascribed based on “feelings about groups more than reasoning about the groups’ interests and involvement in housing politics.” This may offer some hope that, so long as we avoid the blame game, it is possible to engage with coherent explanatory frameworks about housing markets across the political spectrum.