An Economics Lesson from The New York Times

The New York Times restates basic economics in a June 9 editorial that should be required reading for planners and public officials who fail to comprehend how restrictions on housing raise prices. The Times expressed concern about the extent to which investor involvement in some markets has raised the price of houses for new homebuyers and others who actually plan to live in the houses that they purchase. The price increasing impact of excess demand on housing markets from institutional investors is no different what occurs when urban planning policies restrict housing supply, as occurs with urban containment policy.

Referring to the recent house price increases, The Times said “Those gains, in turn, have propelled rising home prices nationwide, in part by reducing supply and in part by fostering a shift in perceptions about the housing market that has drawn some potential home buyers off the sidelines.” In this, The Times simply expresses the economic reality that when demand exceeds supply, house prices (or any other prices), other things being equal, will tend to rise. The cause of the imbalance is of no account.

But The Times did not limit its analysis to economics. Venturing into the social dimension, The Times went so far as to endorse home ownership: “Given the traditional role of homeownership in building wealth, fostering communities and driving the economy forward, a lower rate of homeownership is a troubling development.”

The Times editorial board has taken a position challenging the agendas of some of the most prominent retro-urbanist theorists, who favor more renting and less home ownership, clinging to the fantasy that, somehow housing markets constrained by excessive planning regulations are exempt from the laws of supply and demand.