Policymakers across the United States are searching for ways to ease
the financial burden of housing expenses for local residents. In many
places, housing costs have risen substantially faster than typical
income growth in recent decades (Acolin and Wachter 2017; Schuetz
2019a). A typical market response to rising prices is expanded supply,
but new housing construction has often been slow to materialize and
expensive when finished.
This raises questions about the ability of the market to generate
housing that meets the needs of a broad range of local residents.
To respond to these questions, the Opportunity & Inclusive Growth
Institute at the Federal Reserve Bank of Minneapolis and the Future
of the Middle Class Initiative at the Brookings Institution partnered
to bring together researchers and policy practitioners for a series of
conversations about what we know and how to proceed. The result
was a two-day conference: “Expanding and Diversifying Housing:
Approaches and Impacts on Opportunity,” summarized in this brief.1
Cities and states
will have to address
specific needs, but
a foundation of
research that informs
key questions … will
be key to finding
Cities and states will have to address specific local needs, but a
foundation of broadly applicable research that informs key questions,
like that summarized here, will be key to finding effective solutions.
1. Can new market-rate housing lower housing
Source: Mast (2019), used by permission of the author
Note: Includes 12 of the largest metropolitan areas in the United States. Metropolitan
area is defined according to the most recent core-based statistical area (CBSA)
definition. Only migrants from the same metropolitan area as the new building
are included in each round. Round 1 is the origin units of the individuals currently
occupying the new unit; round 2, the origins of the individuals occupying round 1’s
origin buildings, and so on. Tract characteristics are taken from the 2013-17 American
Community Survey, and all quantiles are computed within CBSAs. Income is median
household income within a tract. Each subsequent round is constructed by observing
the set of individuals currently living in the previous round’s origin buildings, not their
specific units, and the sequence is reweighted accordingly. The sequences begin with
52,000 individuals living in 686 new market-rate buildings.
Source: Romem (2016), used by permission of the author
Note: Observations include the 40 most populated U.S. conurbations. The chart
considers residential areas as developed when they exceed a density of 200 existing
homes per square mile. Developed areas correspond to combined statistical areas
(CSAs), or to CBSAs that are not part of a CSA. Housing prices are always at the
CBSA level. The change in housing prices is the percent change in average inflation-adjusted
quarterly housing prices during the decades spanning 2005-14 and 1975-84.
Supply and price
It can sometimes be difficult to see how building new housing could lower housing
costs for a broad set of local residents. Whether new housing is large, single-family homes on suburban lots
or luxury apartment towers in a city center, it is often priced well above median home prices for its area
(JCHS 2019). Yet connections throughout a local housing market mean that changes in supply for one set
of residents can lead to changes in prices for another set.
Research by Evan Mast (Upjohn Institute) demonstrates how these links lead to new housing options for
a broad spectrum of local residents even when only new market-rate apartment units are built. Figure
1 shows that, on average, the opening of a new market-rate building generates six or more waves of
housing relocations by local residents. Few residents of the new building come from the lower-income
neighborhoods (20 percent in round 1), but relocations into newly available units reach more residents of
lower-income neighborhoods in each round.
Expensive, high-density housing development in central cities is a visible example of expanding supply, but
metropolitan areas have added housing in a variety of ways. Issi Romem (MetroSight) assembled information on
whether metros had expanded by converting land to denser residential neighborhoods alongside data on local
housing prices. Figure 2 shows three types of metro experiences over the past two decades: those that expanded
their residential area substantially with modest price increases (Expansive Metros), those that had substantial price increases and little residential expansion (Expensive Metros), and those that had little of either (Legacy
Metros). The relationships suggest a diversity of urban experiences since 1980. Some metros saw steep increases
in demand from residents—more people wanted to live and work there. Those that responded by expanding
supply by this measure saw more modest price increases; those that did not saw steeply rising prices. Other
metros faced flat demand or even decreased demand from residents and likely face a different set of challenges.
The evidence in Figures 1 and 2 shows that expanding housing in a metro area
moderates price increases and creates new housing options for residents. This is true regardless of whether
cities grow “up” or “out.” Yet residents and policymakers sometimes question whether new housing
development will improve affordability in their city.
Ingrid Gould Ellen (New York University) outlined the evolution of this concern, which she terms “supply
skepticism.” Traditionally, housing development discussions were framed as a trade-off between more housing
with lower prices versus less housing with higher prices and less congestion or other community attributes.
More recently, groups concerned with affordability have questioned whether market-rate development will
lower prices. In other words, the skeptics question whether there is a trade-off at all. Gould Ellen marshaled a
range of evidence, in addition to that in Figures 1 and 2, that suggests that building more housing lowers costs
and improves access for many city residents (Gyourko and Molloy 2015; Ihlanfeldt 2007; Jackson 2016; Saks
2008; Zabel and Dalton 2011). However, Gould Ellen is clear that there are limits to how many residents the
market will reach. “We are never going to get [all the way] there through supply when … incomes aren’t high
enough to cover operating costs. … So … supply is one tool that we have in our toolbox,” she said.
Measuring density, regulation, and diverse impacts
An obstacle to construction of additional
market-rate units can be local regulations. Measuring the stringency of regulation within and across
metropolitan areas is extremely challenging. Researchers have used a variety of methods to measure
regulations, from cataloging specific zoning components to asking local planners their subjective
impressions of restrictiveness (Gyourko et al. 2008; Lewis and Marantz 2019; Schuetz 2019b). Most
empirical studies find that tightly regulated jurisdictions build less housing and have higher housing
costs than loosely regulated jurisdictions, although the estimated size of impacts varies widely across
studies (Gyourko and Molloy 2015). Robert Ellickson (Yale) reported on efforts to measure local regulation
through careful and consistent monitoring of density permitted on each tract in a metro area. Specifically,
he discussed two types of indicators: whether local governments allow multifamily housing and the
minimum lot size required for single-family houses. He found wide variation in these measures between
Austin, Texas; Silicon Valley, Calif.; and New Haven, Conn.
Tsur Somerville (University of British Columbia) remarked that metro area housing policy is “making the
statue out of a block … it’s a lot of little cuts.” This comment reflects the many trade-offs policymakers
have to consider, given that the benefits and costs of new housing supply will vary greatly from resident
to resident. Somerville’s work analyzing the impact of density increases in Vancouver, B.C., via the city’s
“laneway homes” policy illustrates these trade-offs (Davidoff et al. 2019). The policy allowed small
secondary dwelling units to be built on single-family home lots beginning in 2009. Analysis following the
change showed that the impact of additional density on a neighbor’s plot on home prices varied by how
expensive the home was initially. Adding a laneway home on a neighboring lot had no impact on home
prices for most homeowners. But for the most expensive 25 percent of homes, nearby laneway homes were
associated with decreased housing prices.
2. Can improving access to housing in growing areas
improve outcomes for residents?
Source: Newman and Holupka (2015), used by permission of the author
Note: Sample includes 688 children from families whose incomes were less than or
equal to 200 percent of the federal poverty level for 50 percent or more of the child’s
life. Predicted cognitive achievement score is the predicted applied problems score
from the Woodcock-Johnson (W-J) Revised Tests of Achievement, estimated using
an instrumental-variable model. The W-J applied problems test measures a child’s
abilities to analyze and solve practical math problems. A higher score indicates better
math skills. Housing-cost burden is the percent of household income spent on housing
costs. For owners, housing costs include mortgage principal, mortgage interest,
property taxes, homeowners insurance, and out-of-pocket utility costs (electricity,
fuel, water, and sewer). For renters, housing costs include rent and out-of-pocket
A major motivation for expanding housing access in
growing cities is to ensure that more Americans can
live where economic growth is strong. Conference
panelists pointed to the importance of local
economic opportunity while noting that significant
barriers to relocation exist.
Changing geography of economic opportunity
Morris Davis (Rutgers) and Susan Wachter
(University of Pennsylvania) both noted that
the geography of economic growth has changed
markedly. Davis pointed to a global phenomenon:
Many large cities have seen the cost of housing rise
significantly over the past several decades. The fact
that this pattern is not unique to the United States
suggests that macroeconomic changes may be an
important contributing factor. In particular, Davis
points to new technologies that change where and
how goods and, increasingly, services are produced.
He cautioned that such factors are unlikely to reverse
Consistent with a role for these types of changes,
Susan Wachter showed that housing costs are
increasing faster in metros with more employment growth. Rents and home values have both risen more
in metros in the top half of employment growth. This divergence has been more pronounced in cities with
stronger economic opportunities. Wachter’s calculations show that in 1980, the top 10 metros by earnings had
house prices 25 percent above the national average. By 2016, this gap had grown to three times the national
Impacts of housing access on families
These changes in affordability and opportunity translate into meaningful
impacts on U.S. families. Sandra Newman (Johns Hopkins) focused on how housing affordability challenges
for families can affect child health and well-being, and thereby extend these challenges to future generations.
Newman’s work shows that the impacts of housing affordability on children are complex. Families spending
both too little and too much on housing, relative to their income, see lower cognitive scores for their children that
are meaningful when compared with other known predictors of such scores, as shown in Figure 3. Supporting
families with subsidized housing—a policy solution for families spending too much—can have unintended as
well as intended effects on children. Some children see test score benefits, others not, with significant gains for
children with higher base scores and losses for those with initially lower scores (Newman and Holupka 2017).
Ongoing work will examine health impacts of subsidized housing on children, but early evidence suggests that
such housing provides health benefits to children (Boudreaux et al. forthcoming; Fenelon et al. 2018).
Related work by Marcus Casey (University of Illinois at Chicago/Brookings) shows that instances where wages
for lower-skilled workers have not kept pace with housing costs have led to economic and racial sorting. Central
city neighborhoods are increasingly white and wealthy, while poor and minority residents are pushed to less
desirable urban and suburban neighborhoods (Casey et al. 2019). Lower-income residents who are displaced
to older, inner-ring suburbs face higher commuting costs—in both time and money. The inner-ring suburban
jurisdictions often lack a sufficient tax base to maintain aging infrastructure, fund high-quality schools, and
provide social services.
Newman’s and Casey’s research connects to ongoing efforts to extend and evaluate the well-known Moving to
Opportunity (MTO) study of the late 1990s. An important second-wave study, Creating Moves to Opportunity
(CMTO), builds off insights from MTO and work documenting opportunity neighborhoods by Chetty et al.
(2014). The research partnerships leading these efforts are described in the accompanying box.
3. How can cities expand housing? What are the
next steps in housing policy?
In December 2018, Minneapolis made headlines by drafting a new Comprehensive Plan that allowed two-and
three-family homes throughout the city. A few months later, the Oregon Legislature passed a similar
bill to take effect statewide. Minneapolis City Council President Lisa Bender and Madeline Kovacs of the
Sightline Institute, who conducted community engagement around Oregon’s bill, discussed the political
context behind these policies with Jenny Schuetz (Brookings). They were joined by Robert Duffy, planning
director for Arlington County, Va., a pioneering community in transit-oriented development. Below are key
takeaways from their conversation.
Understand the local context
Arlington overhauled the county’s land use plans in the 1980s in
response to growth in Washington, D.C.’s Metro system, prioritizing high-density housing and commercial
activity along transit corridors while preserving low-density residential neighborhoods elsewhere in the
county. The impetus for the density component in Minneapolis’ Comprehensive Plan came from two local
trends: tightening rental markets and community reflection about historic racial disparities stemming
from redlining. Oregon has a long history of statewide land use planning, dating back to the adoption of
urban growth boundaries in the 1970s.
Take time to engage a diverse group of stakeholders
The effort to produce Minneapolis’
Comprehensive Plan took more than two years, with city staff conducting painstaking outreach to every
neighborhood. The resulting broad coalition—including racial justice advocates, tenant advocates, and
environmental groups—shaped the plan’s vision and provided necessary support to elected officials.
Oregon’s state Legislature had previously introduced several similar bills that failed to win approval.
With each iteration, the bill’s sponsors educated voters and legislators about the underlying issues and
accumulated more political support.
Political leadership is essential
In Minneapolis, both the mayor and city council president publicly
embraced the Comprehensive Plan’s goals. They have invested political capital in seeing it implemented.
Oregon’s House Speaker Tina Kotek was a driving force behind HB 2001. One challenge for Arlington is that the county is home to less than 4 percent of the D.C. metropolitan area’s population: Even with forward-looking
policies, the county cannot solve regional housing needs. To prepare for the imminent arrival of
Amazon HQ2, Arlington’s leaders are coordinating with neighboring local governments.
Positive framing of the issue sells better (e.g., “legalize apartments” instead of
“ban single-family-only zoning”).
Next steps in local housing policy
Richard Reeves (Brookings) and Neel Kashkari (Federal Reserve Bank of Minneapolis) concluded the
conference with a wide-ranging conversation examining the larger economic implications of expanding
When asked about addressing the housing affordability crisis, Reeves and Kashkari agreed that all levels
of government must take part. Housing affordability-related problems vary across people and places,
necessitating both local and federal action. Reeves argued that housing tax breaks that primarily benefit
upper-middle-class families should be eliminated. “All of that money could then be reallocated into
much more support for low-income subsidies,” he said. “Very low-income people … don’t actually have
an affordability problem; they have an income problem,” Kashkari noted. “The solution for them is likely
going to be subsidy oriented, going to states or the federal government. But for everybody else, that’s not
the solution … [because] you can’t tax the middle class to then subsidize the middle class.”
Kashkari argued that high housing prices, often attributable to a lack of zoning reform, can reduce the
competitiveness of local economies. He clarified that higher housing prices don’t necessarily equate to an
affordability crisis. “Half of the decrease in affordability for housing is because we’re demanding bigger
homes,” he said. “That is not a public policy problem.” Kashkari emphasized that serious public policy
problems around housing do exist, but that it is important to be exact in identifying them.
A theme throughout the conversation was the importance of ensuring that people have options: options
for communities to live in, options for career paths, and so on. The housing crisis restricts these options
along multiple dimensions. “A lot of people worry about economic competitiveness and effective markets
… [while others worry about] inequality and opportunity hoarding and social mobility,” Reeves said. “The
Venn diagram puts housing in the middle.”
In the end, it’s not just an affordability crisis. It’s an opportunity crisis.
Lessons from research partnerships
Research partnerships, which combine the expertise of practitioners and academics, can be
essential to understanding the effects of bold policies. The conference showcased two innovative
The CMTO program is an ongoing research partnership that provides housing vouchers and
customized moving assistance to families with children in Seattle and King County to move to
neighborhoods identified as high-opportunity. Christopher Palmer (Massachusetts Institute of
Technology) and Sarah Oppenheimer (formerly of the King County Housing Authority) explained
how the partnership works and discussed early findings. Using a randomized controlled trial
design, the team found that over 50 percent of families in the CMTO treatment group moved
to high-opportunity neighborhoods, compared with only 14 percent of families who received
The Santa Clara County rapid rehousing program provides immediate, temporary housing
services to homeless single adults. David Phillips (Wilson Sheehan Lab for Economic
Opportunities (LEO) at the University of Notre Dame) and Ky Le (Santa Clara County’s (SCC)
Office of Supportive Housing) discussed plans for their partnership to evaluate the impact of
rapid rehousing using the fact that funds already prevent SCC from serving all those who seek it.
The panelists highlighted some of the lessons they learned and offered some advice for other
partnerships. The CMTO academic and practitioner teams found that their back-and-forth
communication was extremely valuable for the success of the partnership. Oppenheimer noted
that the teams spent a full year meeting with stakeholders to determine the most effective
intervention. Palmer said that the communications between the teams made the “research
much more relevant and impactful right away.” Le said that partnering with a mission-aligned
organization like LEO was critical. Phillips emphasized the importance of identifying the right
partner: one who is willing to listen and adjust. These research partnerships provide important
examples of how to achieve evidence-based policymaking, especially at a time when demand for
such policymaking is increasing.
Disclaimer: This is a publication of the Opportunity & Inclusive Growth Institute at the Federal Reserve Bank of Minneapolis. The views expressed herein are
those of Institute staff and others who contributed to the conference. They do not necessarily reflect the views of, and should not be attributed to, the Federal
Reserve System or its Board of Governors or the Federal Reserve Banks.
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- Casey, M., B. Hardy, D. Muhammad, and R. Samudra. 2019. “EITC Expansions and Spatial Inequality:
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- Chetty, R., N. Hendren, P. Kline, and E. Saez. 2014. “Where Is the Land of Opportunity? The Geography of
Intergenerational Mobility in the United States.” Quarterly Journal of Economics 129(4): 1553-1623.
- Davidoff, T., A. Pavlov, and T. Somerville. 2019. “Not in My Neighbour’s Back Yard? Laneway Homes and
Neighbours’ Property Values.” Manuscript. University of British Columbia.
- Fenelon, A., N. Slopen, M. Boudreaux, and S. J. Newman. 2018. “The Impact of Housing Assistance on the
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Economics 61(3): 420-35.
- Jackson, K. 2016. “Do Land Use Regulations Stifle Residential Development? Evidence from California
Cities.” Journal of Urban Economics 91: 45-56.
- Joint Center for Housing Studies (JCHS) of Harvard University. 2019. “The State of the Nation’s Housing 2019.”
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- Newman, S. J., and C. S. Holupka. 2017. “The Effects of Assisted Housing on Child Well-Being.” American
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