There’s a desperate need for housing, so why isn’t more being built?

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: John Letzing, Digital Editor, Strategic Intelligence, World Economic Forum & Minji Sung, Data Visuals and Content Specialist, Strategic Intelligence, World Economic Forum

• Housing shortages are often the result of a self-defeating tendency to block new development.

• Impacts of the shortage have worsened recently due to the pandemic and inflation.

• But some examples of successfully countering NIMBYism (“Not In My Backyard”) have emerged.

Even Singapore hasn’t been spared.

In a nod to its limited space, the wealthy island city-state carefully manages the availability of housing by subsidizing home purchases for more than 80% of its population. Yet, home prices there have nonetheless risen sharply of late – reflecting a troubling global situation.

The construction of new housing has generally lagged since the Great Recession. That’s had real consequences – according to the IMF, global house prices increased by nearly 70% in the first two decades of this century. And in many places the amounts people must pay relative to what they earn have become daunting.

The lack of housing supply has been fueled by anxiety about the impact of development on existing home values, apprehension about congestion, and a hyperlocal focus that magnifies both. Ultimately, it all adds up to the same thing: even relatively wealthy parts of the world share an inability to ensure people are wealthy enough to afford a home.

Now the pervasive impacts of COVID-19 and inflation are making matters worse.

However, some promising models for tackling the problem have emerged.

São Paulo, for example, has turned heads with zoning reforms that enable 36% more construction per property area than previously allowed, in a growing city with roughly 20 million residents – and its own experiences with NIMBYism.

Meanwhile Israel has deployed a scheme to boost its housing supply by letting residents sell additional development rights on their property in exchange for structural improvements (described as “upzoning an entire country”). Tokyo has mostly managed to keep homebuilding constant and home prices stable by relaxing restrictions on the construction of taller, denser structures.

Last month, the US unveiled a housing plan that also aims to foster more density by offering financial incentives for conducive land-use policies – while acknowledging a national shortfall of more than 1.5 million homes.

Fewer global NIMBYs and more YIMBYs

The new White House plan has been described as an overdue effort to counter a self-defeating NIMBYism that’s planted deep roots in places like the San Francisco Bay Area.

A recent story delved into ways activists in that region have managed to limit new housing – but it also described efforts to move away from NIMBYism to YIMBYism, by replacing “No” to development with a “Yes.”

Similar shifts could have an impact elsewhere. In Australia, where a recent government report projected an average housing deficit of 20,000 units annually between 2025 and 2032, some observers have pointed to a programme in Scotland as a potential role model.

That programme aims to deliver 100,000 affordable homes in the coming decade, through a combination of grants and private investment.

Housing markets have been hindered by a common flaw: those who manage to buy in tend to not want too many people to be able to enter behind them. So efforts to build more homes fall victim to a desire to preserve personal wealth, even if it means impoverishing others.

A consequence of this pattern is worsened inequality.

In the UK, for example, white British households are far more likely to own their own homes than ethnic minority households, according to government statistics published in 2020 – which showed that only 20% of Black African households owned their home, as did just 17% of Arab households.

Periods of crisis can aggravate already-troubling housing patterns like this.

A report published several years after the Great Recession found that in the US, a country where racist policies and lending practices have restricted Black home ownership, white households that owned their home had started to rebound from the worst effects – while Black households were still struggling to make up lost ground.

Similar discrepancies have emerged during the pandemic; by early 2021, a reported 13.4% of Black homeowners in the US were behind on housing payments and at risk of losing their homes, compared with 4.7% of white homeowners.

More reading on housing and inequality

For more context, here are links to further reading from the World Economic Forum’s Strategic Intelligence platform:

• Two cities in China have raised the bar in terms of seeking talent, according to this piece, by offering housing subsidies worth as much as $1.5 million to applicants with “outstanding contributions to make to the local economy.” (YiCai Global)

• The cost of housing is a big factor in gauging inflation, but how exactly is it calculated? In the US, according to this piece, it’s all about paying personal visits, making phone calls, and approximating rent. (Brookings)

• Finland is the only EU member where homelessness has been declining, which this analysis attributes to an approach that prioritizes housing over other social support policies. (Demos Helsinki)

• A program enabling Native Hawaiians to lease land for $1 a year recently received significant funding, but according to this report it’s still unclear whether those who need financial help the most to build or buy homes on that land will receive it. (ProPublica)

• In Turkey, buying a home has become an elusive dream even for middle-class professionals, according to this report. (Al Monitor)

• Even the fortunate aren’t immune to the impacts of climate change – according to this study, the top ten percent most valuable homes in the western US are 70% more likely to be in high wildfire hazard areas than others. (Science Daily)

• The Minneapolis area has the worst racial homeownership gap in the US, and this public history project aims to deploy data visualizations that build political will to address the problem. (Brookings)

On the Strategic Intelligence platform, you can find feeds of expert analysis related to Economic Progress, Real Estate and hundreds of additional topics. You’ll need to register to view.

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Written by

John Letzing, Digital Editor, Strategic Intelligence, World Economic Forum

Minji Sung, Data Visuals and Content Specialist, Strategic Intelligence, World Economic Forum

The views expressed in this article are those of the author alone and not the World Economic Forum.

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