As a personal finance professor and real estate investor, I have spent years helping my students understand how to build wealth, yet there is one topic that never fails to bring frustration: the daunting challenge of homeownership. I teach them the power of compound interest, the value of time, and the strategies to get ahead, but more and more, I am forced to confront an unsettling reality—despite their preparation and enthusiasm, many of these bright young adults are being priced out of the housing market.
This issue is not just a matter of rising home prices; it is a product of policy decisions that are making homebuilding nearly impossible in many areas. With over 30 years of experience in banking and real estate, I have seen firsthand how these policies—often driven by local governments influenced by well-intended homeowners and housing advocates—are pushing the dream of homeownership further out of reach. This article digs into these roadblocks and offers a simple solution: to make homeownership affordable again, we need to stop making homebuilding illegal.
Table of Contents
Introduction
The Affordable Housing Challenge and Path Forward - Exploring the core barriers and offering practical solutions to increase housing supply.
The Two Camps of Wealthy Homeowners: Nimby Snobs and Price Reactionaries - A breakdown of the two key groups responsible for obstructing affordable housing efforts.
Overcoming Market Distortions and Policy Misalignments - How reduced zoning restrictions can unleash market forces and lower housing costs.
The Political and Government Challenges: How Politicians and Bureaucrats Enable the Housing Crisis - An analysis of the roles political incentives and bureaucratic self-interest play in perpetuating the housing problem.
Conclusion: The Path to Housing Freedom - Summarizing the need to prioritize choice, freedom, and fairness in zoning and housing policies to restore homeownership access.
Resources:
Post-Script: Structural Discrimination in Zoning and Housing - A deeper look at how structural discrimination continues to impact minority communities through zoning laws.
Appendix: Comparative Analysis of the Biden Administration Housing Policies and Bureaucratic Impact - A comparison of the Biden Housing Plan and "Stop Making Home Building Illegal," focusing on housing supply and government bureaucracy.
Further Reading and Citations - A helpful list of sources to help readers explore the affordable housing issue in greater depth.
About the author: Jeff Hulett leads Personal Finance Reimagined, a decision-making and financial education platform. He teaches personal finance at James Madison University and provides personal finance seminars. Check out his book -- Making Choices, Making Money: Your Guide to Making Confident Financial Decisions.
Jeff is a career banker, data scientist, behavioral economist, and choice architect. Jeff has held banking and consulting leadership roles at Wells Fargo, Citibank, KPMG, and IBM.
2. The Affordable Housing Challenge and Path Forward
The affordable housing crisis has grown so severe that, as a percent of income, housing costs have skyrocketed. For today’s buyers, homeownership feels more unattainable than ever. In my homebuying class, I now teach students a range of strategies to navigate this reality—co-ownership, down payment assistance programs, moving further from job centers, and even renting out extra rooms. These methods - called home-buying adaptations - while useful today, were almost unheard of just a generation ago. It is hard to believe that in one of the world’s wealthiest nations, I am teaching twenty-somethings how to survive in an unaffordable housing market. Yet, here we are.
It is time we admit a difficult truth: we are the architects of our own problem. As political satirist Walt Kelly famously said,
"We have met the enemy, and he is us."
This quote perfectly captures the reality of the housing crisis—many of the barriers to affordable homeownership are of our own making.
At the heart of the affordable housing crisis are two groups of people I will refer to collectively as “Rich People.” These are individuals who, over the past 15 or more years, have owned homes and now wield enough influence to block new home construction in their communities. These are often charitable, well-meaning people—volunteers, donors, pillars of society—who will tell you they believe affordable housing is essential. But ask if they would support affordable housing projects in their neighborhood, and their answer is often a resounding "No."
Here lies the catch-22: rich people support affordable housing—as long as it is built elsewhere. The result is that affordable housing does not get built, anywhere that truly solves the problem.
The issue runs deeper because these wealthy individuals can afford to push the challenge off their doorstep. While individually charitable, as a collective force, they have conspired—whether knowingly or not—to keep millions of Americans from entering the housing market. We have met the enemy, and he is us.
Two powerful camps of wealthy individuals are behind this crisis. Ironically, these groups sit on opposite ends of the political spectrum, yet both contribute to making housing less accessible. While these groups clash, it is the poor who get caught in the middle and pay the price.
The first group, the Nimby Snobs, are homeowners in affluent suburbs who oppose any housing that does not match their ideal. They may not say they are targeting poor people, but their actions—supporting zoning laws that block homes that are too small, too tall, or too different—create barriers for anyone seeking affordable housing. They are also the same people who fiercely protect their public school districts from being rezoned.
The second group, the Price Reactionaries, respond by pushing for price controls in cities. These wealthy urbanites advocate for rent controls, but ironically, they do not live in the neighborhoods affected by these policies. Why? Because rent-controlled housing often falls into disrepair, and they would never live there. With no incentive to maintain properties, rent control only worsens the problem.
Both groups, through their influence on local governments, distort the housing market. Local governments and homeowners associations often implement these policies, contributing to a 4 million-unit housing shortage, with half the deficit in the suburbs. As the housing shortage worsens, fueled by pandemic migration, the crisis deepens.
"To create a more balanced housing market, American suburbs must build enough housing to cover their deficit and then more to keep up with growing demand. Yet, in most suburbs, NIMBYism is proving effective at preserving exclusionary zoning and burdensome regulatory restrictions. Keeping up with housing demand is nearly impossible." - editors, Up For Growth
The Nimby snobs, Price Reactionaries, and their local governments are distorting the housing market—driving supply down and pushing prices up. To them, I say: it is time to lay down your rich-person weapons! If we truly agree that housing needs to be more affordable, there is a straightforward solution: increase housing supply. And that starts with a simple step—stop making homebuilding illegal and allow prices to reflect the market’s needs. Here is how:
Start with a blank slate. Set aside existing zoning restrictions, so that housing choice becomes the default. Land use restrictions should only exist if they are absolutely necessary for safety. Any new zoning proposals should be judged by an impartial authority—someone with no stake in the community’s real estate. Zoning rules should also be regularly “blank slated” to prevent zoning creep, an unfortunate but inevitable part of human nature. This process should be applied to all zoning bodies—commissions, local governments, HOAs—any entity that has the power to impede housing construction.
Avoid price controls and let prices reflect scarcity to attract builders. While counterintuitive, higher prices today signal demand, drawing in developers who increase supply, which ultimately drives prices down. Price controls, though intended to protect renters, often restrict supply by deterring development and maintenance. Allowing market-driven pricing creates a feedback loop: rising prices prompt new construction, and increased supply helps stabilize or lower prices over time, making housing more accessible.
Removing zoning restrictions and allowing prices to reflect demand are essential steps that work best together. Without zoning barriers, homebuilding becomes a viable response to price signals, creating an open market where high prices attract developers to build where homes are most needed. This combined approach both increases supply and accelerates construction by eliminating regulatory delays. Together, these measures create a dynamic housing market that responds efficiently to demand, gradually making housing more affordable.
If you are a wealthy homeowner, your instinct might be, “I don’t want housing prices to drop for me—I like my wealth!” But do not worry—your home’s value is safe. Thanks to previous zoning rules, your property already benefits from factors like lot size, square footage, and architectural style. In fact, the price of your home may even increase, as it becomes more scarce compared to the new homes being built.
This approach can be summed up as HIMBY—“Homes in My Backyard.” Increasing the housing supply will lower prices across the board. Let the market do its job. Let prices signal where housing is scarce. By reducing restrictions on builders, the housing supply will rise, and affordability will follow.
Some advocates argue that we need to set aside housing specifically intended to be affordable. But this is not necessarily true when zoning restrictions are removed. When the supply increases, all housing becomes more affordable. Older homes can be repurposed or converted into affordable options—if it is legal to do so. Smaller homes or multi-family buildings will naturally be built—if it is legal to do so.
3. The Political and Government Challenges: How Politicians and Bureaucrats Enable the Housing Crisis
The political and government challenges surrounding affordable housing are complex and deeply embedded in bureaucratic structures and political incentives. F.A. Hayek, a Nobel laureate economist and political philosopher, warned of the dangers of centralized control and bureaucracies, which he saw as impediments to freedom and economic efficiency. Government bureaucracies, in what Hayek might describe as the administrative state, consist of professionals whose roles depend on maintaining regulations and preserving their authority. Deregulation—allowing the market to function freely—threatens these roles by diminishing their control and, in many cases, their livelihoods.
F.A. Hayek's concerns about centralized control are closely aligned with James Buchanan’s public choice economics, which highlights the principal-agent problem. While Hayek focused on the dangers of bureaucratic overreach, Buchanan showed how policymakers (principals) delegate authority to bureaucrats (agents), whose personal goals—such as career advancement and budget maximization—often diverge from the policymakers' intentions of efficient, equitable land use. This misalignment leads to inefficiency, incomplete implementation, or worse, rent-seeking behavior. Local governments are particularly vulnerable to these risks, with conflicts of interest and self-dealing potentially compounding over time and worsening the problem.
To make matters worse, the real estate market operates on a slow feedback loop. Even without burdensome regulations, it takes time to construct housing and observe market shifts. Politicians, however, work within short election cycles. Promoting policies that would increase housing supply might not yield results during their term, and so the political incentive to take on this challenge weakens. In fact, they may see such policies as benefiting their successors rather than themselves. Implementing a long-term, supply-side housing policy takes not only political courage but also a willingness to challenge the entrenched bureaucracy. It is far from an easy political win.
More often than not, politicians and bureaucrats deflect responsibility by scapegoating investors or builders, blaming them for rising prices, when, in reality, it is government policies distorting the market. Investors are merely responding to these distorted incentives. If we align the incentives correctly, both investors and the agents within the system will help optimize the market for housing.
Next, shown is the economic dynamic between policy, politicians, bureaucrats, incentives, and the time misalignment:
Consider this: what if a politician, to ease housing costs, says, “Let us implement rent and price controls.” The politician's idea is to keep housing costs from going up - from time period 2 to 3.
Unfortunately, this, too, is a misguided solution. People have proven to be very diligent when they want something, if prices are artificially kept down and supply is not able to adjust, they will assert transaction costs to acquire that lower-cost good. This is like the way surge pricing works for Uber, except the price "surge" for housing price controls is in the form of non-monetary transaction costs. As economist Mike Munger points out:
"So if you say that the price can't go up beyond a certain amount, there's a bunch of people who want that low-price apartment. They're going to queue up. They're going to try to make bribes, they're going to hold on to it for a long time and have illegal sublets, and so the effect of price controls is going to make it much more difficult for the market to do its work." - Mike Munger podcast episode "All Housing is Affordable Housing"
Adding rent controls on top of demand-side policies is akin to jumping from the frying pan into the fire. The better course of action is to let the market work freely.
An example of self-dealing in government is the acceptance of higher property taxes stemming from inflated home prices—prices driven up by zoning restrictions. Local governments, in turn, offer down payment assistance programs, using taxpayer money to help people qualify for mortgages made expensive by those very same restrictions. It is a shell game where government employees are paid to shift money from one pocket to another, and it is all done at the public’s expense.
As John Maynard Keynes famously said: “In the long run, we are all dead.” Yet in housing, the story is different. A more fitting narrative might be: “In the long run, zoning causes housing to be less affordable and disproportionately impacts society’s most vulnerable.”
Even at the highest level, incentives matter. Consider the President of the United States and the Council of Economic Advisors (CEA), which is tasked with crafting long-term, beneficial real estate policy. In truth, the answer to both questions—a) whether the President listens to the CEA’s long-term real estate policy advice and b) whether the CEA also serves short-term political goals—is "Yes." The CEA faces the ongoing challenge of balancing long-term economic benefits with the short-term political realities of reelection campaigns. This tension between immediate political incentives and long-term housing needs highlights how even at the highest levels, incentives shape outcomes, and even economists are not immune to this reality. This tension is especially poignant for real estate policy, as it inherently requires long-term thinking to maintain the health of the real estate market for all participants.
4. Conclusion: The Path to Housing Freedom
Great wealth brings great responsibility, yet wealth without accountability allows us to impose our beliefs on others—whether those beliefs are fair, true, or merely a matter of personal preference.
Consider zoning by lot size or house size restrictions. It is a short step from these rules to zoning policies designed to exclude lower-income or minority groups from communities. That is not fair.
Similarly, zoning by architectural type may seem innocent, but it is often a way to block more efficient, lower-cost designs favored by lower-income individuals. That is a matter of style, not necessity.
At the core of this issue is a lack of choice. Earlier, we explored the deep economic rationale for expanding individual choice in housing. Zoning laws restrict housing supply, drive prices up, and lock out groups that are not yet on the housing ladder—including young people aspiring to buy their first home. It is time to rethink how we zone, so that all housing stakeholders—those who need homes as well as those who own them—have a voice in the process.
Zoning challenges are like secondhand smoke. It is one thing for someone to smoke alone, creating their own health issues. That is their right. But it is another thing entirely when their smoke harms others—shortening their lifespans. That is not fair.
America was founded on the principles of freedom and individual choice. Zoning laws, except those that ensure basic safety, go against these values. They restrict the freedom of lower-income and minority groups, imposing unfair limitations on where and how people can live. Americans should have the freedom to use their wealth as they see fit and to move if they do not like their neighbors. However, they should not have the right to impose their will on others when that will is unfair, untrue, or simply a matter of personal style.
I wish I did not have to teach my students how to navigate today’s unaffordable housing market. These students will graduate, find good jobs, and eventually adapt to these challenges. They are already ahead of the curve by taking personal finance seriously. But there are millions of other Americans—those without a political voice and with little hope of climbing the housing ladder—who are left behind. This must change.
The solution is simple. We need to stop making homebuilding illegal by removing restrictive zoning laws and allowing the market to work. This will increase housing supply and bring prices down. It is time to put an end to the barriers we have created and give everyone a fair shot at homeownership.
We have met the enemy, and he is us.
5a. Post-Script: Structural Discrimination in Zoning and Housing
In the appendix of the article I wrote, called The subtleties of lending discrimination, three primary theories of discrimination are described:
Taste-based discrimination
Statistical discrimination
Structural discrimination
Of the three, structural discrimination is stubborn, remains alive and well today, and can be found in many zoning rules.
When America was founded, we allowed slavery by law. Then, resulting from the Civil War, slavery was abolished by law and the 1865 amendment to the U.S. Constitution. But racial discrimination persisted. Then, in 1964, the Civil Rights Act was implemented to abolish other forms of legalized discrimination that had crept its way into the cultures, laws, and habits of American life. Today, a remaining bastion of social injustice is found in structural discrimination. This is current-day racism and other forms of discrimination directed toward groups of citizens identified in the Civil Rights Act - known as "protected classes." Protected classes include race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), national origin, age (40 or older), disability and genetic information (including family medical history).
Structural discrimination is still found in American life, deeply embedded in systems, rules, written or unwritten policies, and entrenched practices, such as the systemic racism enabled by zoning. Structural discrimination is found in zoning rules suggested earlier that are not fair, not true, or a matter of style. Whether or not zoning boards intend to be biased toward protected classes is not the point. The point is, zoning - regardless of motivation - creates disparate impact toward protected classes.
The title of this article suggests there is a “simple answer.” However, zoning and related discriminatory behavior are deeply rooted in our cognitive biases and human nature. While the solution may seem straightforward, it falls into a category of actions that, despite knowing we should take them, are challenging to implement due to these ingrained biases. Achieving this will require us to hold ourselves collectively accountable, overcoming the mental barriers that often stand in the way of meaningful change.
University of Texas Law professor A. Mechele Dickerson wrote in the 2021 Emory Law Journal article called Systemic Racism and Housing:
....few [Blacks and Latinos] can afford to buy homes in neighborhoods that have exclusionary zoning laws or in neighborhoods with a strong NIMBY presence.
Federal, state, and local housing policies have consistently made it easier for whites to become homeowners and increase their household wealth. These same
policies made it harder for Blacks and Latinos to buy homes or even find
affordable rental housing, particularly in high-opportunity neighborhoods.
Given how deeply embedded racism is in this country’s housing laws and
policies, Blacks and Latinos will continue to languish in housing markets unless federal, state, and local governments commit to adopting anti-racism laws and policies to remedy the harm caused by prior racist laws and policies.
5b. Appendix: Comparative Analysis of the Biden Administration Housing Policies and Bureaucratic Impact
In May 2022, the Biden administration launched the Housing Supply Action Plan to tackle the housing affordability crisis by increasing housing supply, removing regulatory barriers, and expanding financial assistance for homebuyers. The plan aimed to build over 2 million homes and address the severe shortage of affordable housing across the country.
In 2024, the administration expanded on this initiative, introducing new measures such as repurposing federal lands for housing development and boosting financing for manufactured housing. These additions build on the earlier efforts to alleviate housing shortages and lower costs for both renters and homeowners.
This analysis compares key elements of both the 2022 and 2024 housing plans with the ideas presented in Stop Making Home Building Illegal, which argues that restrictive zoning and government overreach are core issues behind the crisis. The comparison evaluates how well the Biden plans address housing supply and their impact on government bureaucracy, using James Buchanan’s principal-agent problem as a framework.
Biden Administration Policy Measure | Comparison to Hulett's article - 'Stop Making Home Building Illegal' and addressing housing supply | The Principal-Agent Problem and Bureaucracy |
|---|---|---|
Building and Preserving Affordable Homes (2 million new homes) | Help increase housing supply. Aligns with the article's call to increase housing supply by allowing more construction. | Stay about the same. While reducing bureaucratic oversight of individual housing, the administrative burden of managing a large-scale construction program offsets potential improvements. |
Mortgage Relief Credit ($5,000 for first-time homebuyers) | Neutral to housing supply. This measure does not address supply directly, but it helps first-time buyers access existing housing. However, in the short term, it could increase demand and drive up prices, potentially making housing less affordable, which is contrary to affordable housing goals. | Stay about the same. This policy impacts buyers but does not significantly alter the size or influence of the bureaucracy. |
Down Payment Assistance for First-Generation Homebuyers ($25,000) | Neutral to housing supply. Assists buyers, but does not increase overall housing supply. However, in the short term, it could increase demand and drive up prices, potentially making housing less affordable, which is contrary to affordable housing goals. | Get Worse. A nationwide program would require significant bureaucracy to oversee, verify eligibility, and distribute funds, increasing government oversight and administrative burden. |
Removing Zoning and Regulatory Barriers (PRO Housing Program) | Help increase housing supply. Directly addresses the article's recommendation to remove zoning barriers to increase construction. | Improve. Removing zoning and regulatory barriers diminishes bureaucratic control, shrinking its influence. |
Expanding Low-Income Housing Tax Credits (1.2 million rental units) | Help increase housing supply. Increases rental supply, which can reduce overall housing costs. | Stay about the same. Expanding rental housing affects market dynamics but does not significantly reduce bureaucratic intervention. |
Neighborhood Homes Tax Credit (400,000 starter homes) | Help increase housing supply. Supports the article's argument for increasing supply to lower prices. | Stay about the same. While encouraging home construction, the bureaucracy required to manage the tax credit program offsets potential improvements. |
Tenant Protections (corporate landlords rent cap of 5%) | Decrease housing supply. Rent caps can disincentivize landlords from maintaining or building new properties, similar to the article's critique of price controls. | Get worse. Rent caps could lead to more bureaucratic control over the housing market, expanding the role of regulators. |
Streamlining Housing Development near Transit (TIFIA/RRIF loans) | Help increase housing supply. Streamlining development aligns with reducing regulatory friction, as recommended in the article. | Improve. Streamlining development near transit reduces bureaucratic hurdles, shrinking its scope and influence. |
Repurposing Federal Land for Affordable Housing Development | Help increase housing supply. Repurposing federal land reduces housing shortages, similar to reducing zoning restrictions as the article suggests. | Improve. Repurposing federal land reduces bureaucratic control over housing supply by decreasing reliance on restrictive local policies. |
Boosting Manufactured Housing (expanding financing and grants) | Help increase housing supply. Boosting financing for manufactured homes increases affordable housing supply, aligning with the article's emphasis on expanding housing options. Assuming manufactured housing can scale quickly, the short-term impact of increased demand on prices should be muted. | Improve. Expanding financing and grants for manufactured homes lowers bureaucratic control over traditional housing markets. |
5c. Further Reading and Citations
Hulett, Jeff. Affordable Housing Solutions. The Curiosity Vine, 2023.
Hulett, Jeff. From Fiction to Fact: The Story of How Zero-Based Budgeting Could Reshape America’s Administrative State. The Curiosity Vine, 2024.
Hulett, Jeff. The Subtleties of Lending Discrimination. The Curiosity Vine, 2022.
Dickerson, A. Mechele. Systemic Racism and Housing. Emory Law Journal, 2021.
Buchanan, James M. The Limits of Liberty: Between Anarchy and Leviathan. University of Chicago Press, 1975.
Hayek, F.A. The Constitution of Liberty. University of Chicago Press, 1960.
Glaeser, Edward L., and Gyourko, Joseph. Rethinking Federal Housing Policy: How to Make Housing Plentiful and Affordable. American Enterprise Institute Press, 2008.
Munger, Mike. All Housing is Affordable Housing. Podcast episode, EconTalk, 2020.
Schwartz, Alex F. Housing Policy in the United States. Routledge, 2014.
Fischel, William A. Zoning Rules! The Economics of Land Use Regulation. Lincoln Institute of Land Policy, 2015.
Trounstine, Jessica. Segregation by Design: Local Politics and Inequality in American Cities. Cambridge University Press, 2018.
Yglesias, Matthew. The Rent Is Too Damn High: What To Do About It, and Why It Matters More Than You Think. Simon & Schuster, 2012.
The White House. President Biden Announces New Actions to Ease the Burden of Housing Costs. The White House, May 16, 2022.
Biden-Harris Administration. Building a Stronger Housing Future: Updates to the Housing Supply Action Plan, 2024. U.S. Government Publishing Office, 2024