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It is a supply/demand issue, but it is not simple. Demand for housing in the sense of people needing housing is not the same as economic demand for housing. And in order to have economic demand for housing, you have to have people with the means to buy. The housing market is not a smooth curve from zero to McMansion---there is effectively a cutoff. Right now, even if builders sold their houses at cost, in places with sufficient economic activity to support employment, the real estate cost would still put those houses out of reach of most low-income buyers. Because real estate in the past few decades has risen faster than wages, mortgage payments and rent have risen as a percentage of income for most Americans. Renters simply can't accumulate the capital needed for a down payment, nor the credit rating needed for a reasonable mortgage interest rate.

So while intervening directly in housing is one policy solution, another would be to prevent the wealthy from continuing to capture a wildly disproportionate share of economic growth, which would both slow acute real estate appreciation in urban areas (by reducing the capital the wealthy have to buy up rental properties) and increase the pool of able buyers for lower income housing.

> even if builders sold their houses at cost, in places with sufficient economic activity to support employment, the real estate cost would still put those houses out of reach of most low-income buyers

This makes no sense. Even if the low income families can't buy the new units, the people who do vacate their old units and there is less demand for the unit those low income families currently occupy.

> Renters simply can't accumulate the capital needed for a down payment, nor the credit rating needed for a reasonable mortgage interest rate.

Both of these are variable costs, depressed by increases to the housing supply.

> prevent the wealthy from continuing to capture a wildly disproportionate share of economic growth, which would both slow acute real estate appreciation in urban areas (by reducing the capital the wealthy have to buy up rental properties)

This is like banning supermarkets buying from farmers. Do we want every property developer to also have to specialise in rental management? Or are we trying to get every renter to open mortgages?

>Even if the low income families can't buy the new units, the people who do vacate their old units and there is less demand for the unit those low income families currently occupy.

You're making the mistake I mentioned, confusing demand for actual housing with demand for real estate. It will indeed marginally depress demand for housing, but capital can step in and absorb the marginal supply, for rental or other purposes. As long as there is more demand from capital than supply, real estate prices will stay high even if actual demand for low income housing remains stable or even declines.

>This is like banning supermarkets buying from farmers.

Farmers are selling perishable goods, not income-producing assets. As long as real estate is income-producing, it will be a viable investment, and as the old saying goes, they aren't making more of it. So whatever the dynamics of the actual housing market are, the underlying dynamics of the real estate market will tilt the table toward capital. And the sharper the income gradient is in society, the worse the problem will become.

I ask this not to argue, but in the hopes that I might learn something:

> As long as there is more demand from capital than supply, real estate prices will stay high even if actual demand for low-income housing remains stable or even declines.

Wouldn't this be true of just about any good? I agree that an unregulated increase in supply is likely to result in increase of properties purchased for use as a rental property, but:

(1) The more property there is available for sale, the less I'm willing to pay for any given property. I'm not sure why real estate would be different.

(2) If your argument is that such property will be purchased predominantly by landlords, I don't see how that counteracts the economics of supply and demand. Why wouldn't this still drive down rent? Unless you're suggesting collusion by landlords?

> and as the old saying goes, they aren't making more of it.

I feel like I must be misunderstanding you, because this seems to contradict your argument? I'm suggesting the solution is more supply -- literally making more of it. What am I missing?

Again, not trying to be argumentative. I feel like you're seeing or understanding something that I don't, and I'd appreciate being able to understand your perspective here.

I think the gist of it is that real estate prices are driven by the average, while homelessness is driven by the median. In a static system where everyone's level of wealth is frozen, then increasing housing supply would trickle down as you suggest. In reality, average wealth is increasing as fast or faster than housing supply can be added. If new wealth were more or less evenly distributed, this wouldn't be a big problem ("a rising tide lifts all boats!"), because the median wealth would move roughly in step with the average. But it isn't. Over time, a steadily increasing fraction of new wealth is captured by people who are already wealthy, meaning that an increasing fraction of homes are owned by the wealthiest X% of the people, and an increasingly large proportion of the population must rent. And because, unlike most consumer goods, housing is not an option (ie, the market is inelastic), rental prices are constantly driven toward the limits of tolerance. So we see a greater and greater share of most peoples' income going toward housing, with the accompanying economic and social stress that creates, including homelessness.

>Also, increase the supply of SMALL homes. Why is every new house a McMansion?

This is a huge part of the problem. The issue is that there are so many fixed costs to build (permitting, utility, special taxes, etc...) that don't depend on sq ft. At the same time, all valuation is based on sq ft. This creates a huge incentive for builders to max out sq ft.

Solutions are to get all school funding from the state, streamline permitting based on pre-approved designs, give builders reduced utility hook up costs in areas that are lacking viable housing density. IOW - good luck with that problem.

Similar to the new ADU laws in CA, it would be awesome if they encouraged small communities with tiny houses and some common resources.

It's more than just supply and demand. There are a lot of companies and private investors buying up multiple residential properties to rent out. There are a significant amount of properties simply being rented out on Airbnb/VRBO and their ilk. This is having a measurable impact on housing prices, and making additional housing unavailable to local residents. We need to increase tax penalties on companies and individuals buying up residential properties that aren't their primary residence and municipalities need to do a better enforcing zoning laws that are probably already on the books that should prevent short term rentals in residential areas.

https://www.forbes.com/sites/garybarker/2020/02/21/the-airbn...

That's just supply and demand. Either there is demand for rentals, or these companies and individuals are losing their shirts and the houses will be back on the market eventually.

They're all huge because getting anything built at all is a Herculean lift, so to make it worth your while it's going to be big and expensive. Blame red tape.