The feedback loop we keep turning off
The YIMBY coalition is broad and growing, but bad economics will undermine even the best land use reforms.
Good urbanism should transcend politics. Socialists and capitalists can walk the same neighborhood and agree it’s a pleasant place to live. They can each appreciate the tree canopy, the corner café with people spilling onto the sidewalk, the mix of ages on bikes and on foot, the architectural details of older buildings, and so on.
Whether they arrive by bus, bike, car, or on foot, people across the political spectrum want the same thing: places that work for everyday life. Places that feel safe, accessible, and appealing for young and old alike.
Unlikely alliances are forming around this shared vision. People who call themselves conservatives, liberals, capitalists, and socialists are standing at the same town hall podiums, calling for changes that a decade ago would have been dismissed as fringe. The YIMBY (Yes In My Backyard) movement is one of the easiest to put your finger on.
But there’s one topic that these groups will continue fighting over: economics. Not who has more money, but fundamentally different views on how an economy thrives or dies. There’s broad consensus on the ends (safe transportation, abundant housing, etc.) but the means will be hotly contested. And the stakes are high enough that it’s worth being honest about which approaches actually work.
Prices are signals
Without outside interference, a price tells builders, buyers, and investors where scarcity exists and what people are willing to trade for something they value. If everyone in a town has an apple tree, apples are cheap. If only one person does, apples are expensive.
As Nobel prize winner Friedrich Hayek put it, prices are “a system of telecommunications.” Prices aren’t good or bad, they’re indicators. Prices tell us something. When the price of small and medium-sized homes rises, it means there aren’t enough of them to meet demand.
When a government intervenes to put a limit on housing rent or freezes prices, they’re turning off the feedback loop that tells housing suppliers where housing opportunities exist. Rent control sounds compassionate, but the outcomes undermine the goal. It discourages new construction, incentivizes disinvestment by property owners, and traps existing tenants in place, all while locking out potential new renters. You can’t balance supply with demand when the pricing mechanism is disabled. You can’t build your way out of a crisis if builders can’t read the signals.
What history shows us
In the Soviet Union, state ownership of housing led to chronic shortages. Millions of people waited years for a place to live, crowded into communal apartments while black markets emerged for basic dwellings. In Cuba, government control left housing stock decaying, with families crammed into crumbling buildings amid perpetual repair backlogs. Even in more moderate cases like Sweden’s post-war rent controls, people sat on waiting lists because suppressed prices discouraged new construction and maintenance.
These weren’t failures of effort or intention. They were failures of feedback. Without profit motive and pricing discipline, resources drift, costs balloon, and production slows, because there’s no mechanism to punish bad decisions or reward good ones.
Socialist housing schemes tend to treat the problem as one of allocation rather than production. But you can’t allocate what hasn’t been built. And you can’t build at scale without market signals showing what to build, where, and for whom. You can’t central-plan your way into abundance. You can’t price-freeze your way into affordability.
If pricing is allowed to function naturally, housing providers will think carefully about what kinds of homes people actually want. Investors weigh risk. Builders decide whether it’s worth constructing a new duplex or renovating an old triplex. These distributed decisions made by people with real skin in the game respond to reality in real time in a way no central planner can replicate.
The path forward
If you care about housing abundance, the good news is that the policy prescription is fairly clear: loosen the local land use rules that restrict what can be built and where. Reforming zoning, permitting by-right development, eliminating parking minimums, and legalizing a mixture of land uses in one neighborhood are levers that increase the supply of homes.
It doesn’t matter how pro-housing a land use policy sounds on paper if the underlying economics ignores supply and demand or artificially manipulates prices.
The urbanist coalition is broad, and that’s a strength. But if human flourishing is the goal, and we genuinely want a world where everyone has a decent place to live, then we can’t afford to ignore the economic fundamentals that determine whether housing gets built in the first place.
Let the market work. That’s how you get housing abundance.
One thing I see here in Germany is that pricing is indeed a wonderful signal for the investors to know where the best profit margins are. Sadly that does not necessarily overlap greatly with where affordable housing is needed.
Some good points but misses a whole lot in the simplification. Price is but one signal and it's an overall or composite at that. It requires interpretation. Change in price does not, on its own, tell you anything about what drives it. When capital appreciation is the primary motive for increased demand it is not a housing supply issue at all.
Adjusting land use and building permit policy to improve housing can be like prescribing appetite suppressants for a tapeworm -- sensible if you think the problem is eating too much, absurd once you know what's actually consuming the resources.