I work and live in California, the poster child of the national housing crisis. Here the median home price is $800,000, but prices are much higher in coastal metropolitan areas, with the median home price in the San Francisco Bay Area reportedly nearing $1.3 million. The poverty rate is the highest in the nation when housing is considered. Not surprisingly, homelessness is skyrocketing. Prices are surging everywhere in the country. US home prices surged 18.4 percent in November 2021 from a year earlier.[1] About one quarter of renter households are spending more than one half of their income on rent.
The prevailing narrative, especially in California, explains the high cost of housing as resulting from a lack of supply due to local-government and NIMBY (Not in My Back Yard) opposition to new development. While such NIMBYism is certainly a factor, it is surprising that similar attention is not being paid to other underlying causes, including restrictions on development in undeveloped areas, higher labor and land costs, and the global flow of investments.[2] Most surprising is the lack of attention on the Federal Reserve, even though its policy interventions have had profound effects on housing prices.
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