Houston, you have a problem: How large cities accommodate more housing

Abstract

AbstractWe document how a select set of large and growing metropolitan areas have accommodated growth in their housing supply over 40 years. In particular, we examine how housing provision has evolved for the largest four metropolitan statistical areas (MSAs) in California and Texas. Despite differences in their topographies and regulatory environments, we find several common dynamics. As these MSAs grow, we see that fewer new net units are built at the periphery and a smaller share of the new units are built as single‐family detached houses. As a greater share of new net units are built in infill locations, more units are built using higher‐density—and more costly—multifamily housing construction techniques. Interestingly, we see these housing supply patterns in both “pro‐growth” MSAs and “highly regulated” MSAs. Among all of our sample MSAs, we also find a declining share of Census tracts that participate in accommodating growth. Our results are consistent with the existence of a convex housing supply curve. We believe that this secular trend will pose genuine challenges to many urban housing policies aimed at improving affordability.