The Surprising Truth Behind America’s Housing Crisis: Why Deregulation Isn’t the Fix

Every few months, a familiar message resurfaces in housing policy debates: if cities would simply “deregulate” and eliminate zoning restrictions, housing would become magically affordable. But a groundbreaking academic study challenges this long‑held assumption—and the findings are shaking the foundation of the deregulation narrative.

According to the research, conducted by four leading urban scholars, the true driver of America’s affordability crisis isn’t zoning, regulations, or construction slowdowns.

It’s economic inequality—pure and simple.

Why Deregulation Isn’t the Golden Ticket

The authors modeled several major U.S. cities, including San Francisco, and demonstrated that even if construction boomed at unrealistically high levels, rents would barely move for decades. Their mathematical simulation found it could take up to 100 years of extraordinary housing production to bring rents down to levels ordinary workers could afford.

Even one of the study’s lead authors, UCLA professor Michael Storper, has repeatedly warned that deregulation can actually worsen displacement in high-demand areas.

Upzoning Has Benefits—But Not the Ones You Think

The authors don’t villainize upzoning. In fact, it has real perks: improved access to jobs, shorter commutes, and reduced carbon emissions. But there’s a catch—those perks make neighborhoods more desirable, often pushing prices up, not down.

The Real Culprit: Wealth Gaps and Inequality

The study reinforces findings from the National Bureau of Economic Research: housing prices follow income growth, not zoning policy. Even places with minimal zoning—like Houston—or shrinking cities like Cleveland continue to face affordability issues because wage gaps are widening.

San Francisco, for example, saw both mean rent and mean income rise roughly 600% between 1980 and 2019. But workers without degrees saw far smaller income gains. That widening gulf is the core of the crisis.

The Tax Factor No One Talks About

The mid‑20th century—a period often remembered as an era of affordable American housing—had something the modern era doesn’t: extremely high marginal tax rates for the wealthy. That suppressed inequality and pumped more money into middle‑income households.

Today, wealth is concentrated in stock options and investments—many lightly taxed or not taxed at all.

Developers Aren’t the Villains—But the Market Has Limits

The study highlights an emerging economic idea: option value. Developers often hold off on construction when they expect future profits to be higher. Ironically, regulations can sometimes push them to build sooner, not later.

Even in wildly optimistic scenarios—tens of thousands of new units built every year—rents wouldn’t fall meaningfully for decades. One projection estimated 124 years before the average working-class resident could afford typical rent.

If Inequality Isn’t Addressed, No Policy Will Fix Housing

The authors warn that unless the U.S. confronts its economic divides, housing policy tweaks like upzoning amount to little more than rearranging deck chairs on the Titanic.

This is the conversation cities urgently need—not just how many units we can squeeze onto land, but how income inequality shapes every corner of the housing market.

What This Means for Real Estate Professionals

For agents, mortgage brokers, investors, and anyone navigating today’s volatile market, understanding these dynamics is essential. Markets aren’t shaped by zoning alone—they’re driven by wage trends, economic forces, and investor expectations.

This is why institutions like Cameron Academy emphasize economic literacy alongside licensing. Today’s professionals must understand not just the laws—but the forces behind them.

Explore the Original Reporting

This article draws from excellent investigative reporting by Tim Redmond at 48 Hills. Explore the full story here:

New study shows that deregulation is not the answer to the affordable housing crisis – 48 Hills

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