Deregulation alone will not build the houses America needs

Scott Turner, the Trump administration's housing chief, told Fox News that Florida and Texas are "ahead of the game" on housing affordability, crediting their willingness to ease regulatory barriers and encourage new home construction. He is not wrong that unnecessary restrictions on building — zoning laws, permitting delays, land-use rules drafted more to protect incumbents than to serve communities — do genuine damage to supply. That diagnosis I would not quarrel with.

But here is where I must insert a word of caution, because the argument, if left there, is dangerously incomplete. Markets build what is profitable to build. In a country where land costs, labour shortages, and construction-material prices are all running high, "easing regulations" tells a developer that she may build — it does not tell her that she will earn a return doing so. The marginal unit of genuinely affordable housing, by definition, sits at the edge of viability. Removing a planning obstacle does not manufacture the capital or the confidence that moves a bulldozer.

This is the old error of mistaking a necessary condition for a sufficient one. I spent a good deal of my professional life arguing that private investment is driven less by the objective returns available than by the expectations of future returns — what I called animal spirits. In a market where buyers are stretched, where mortgage rates remain elevated, and where developers have been burned before by demand turning cold, no amount of permitting reform will conjure the confidence that investment requires. The spirits are not lifted by paperwork alone.

What anchors those spirits is a credible public commitment on the demand side: federal financing mechanisms for genuinely affordable units, direct public investment in social housing where the market will not go, and — critically — the assurance that the buyers for these homes will be there. That means wages must be adequate, employment must be secure, and the interest-rate environment must not be so punishing that households are priced out regardless of what the supply side does. These are macroeconomic conditions, not planning conditions, and no state-level deregulation can conjure them.

I would also note — and this is inference, not recollection of modern data — that Florida and Texas, the cited leaders, have very large populations of low- and middle-income workers in hospitality, logistics, and care work for whom the new market-rate supply being unlocked is simply not relevant. The nurse, the warehouse worker, the school aide: they do not benefit from a luxury tower that is nominally "new supply." Filtering theories, whereby luxury supply gradually frees up units for lower-income households, operate over timescales of decades, not the electoral cycle in which the housing crisis is being judged.

None of this is an argument against reform. Tear down the obstacles, by all means. But pair the scalpel of deregulation with the engine of public finance. The state has both the duty and the capacity to support investment when the private market — for rational reasons of its own — will not go where the social need is greatest. A housing policy that hands the entire problem to the market, and then declares victory when permits rise, will disappoint — and the disappointment will fall, as it always does, most heavily on those who can least afford to wait.