Why Aren't We Building More Multifamily Houses?

A blog about business and economics.
May 8 2012 11:03 AM

Why Aren't We Building More Multifamily Houses?


With the population growing, rents high and rising, household credit impaired, and building trades unemployment high, the reasonable thing for the economy to be doing would be to build lots of rental housing. And indeed there's a certain perception out there of a multifamily construction boom. But compared to where we were in the 1980s, it's actually incredibly tepid.

What's more, rather than rents falling in response to all this construction they actually continue to rise. The risk is that if we can't build enough new houses quicklly enough, the Fed is going to call in the inflation police and bring rent hikes to a halt by increasing unemployment. So the question of why aren't we building more apartments is crucial.


Karl Smith, citing me, blames anti-density land use rules. Naturally I would like everyone to buy my book and it would certainly be convenient if my pet long-term issue were also the solution to our short-term problems. But I'm actually not sure it's true. My reason for doubting it is that the construction undershooting doesn't seem notably concentrated in the supply-constrained markets. What's more, every time I speak to people who are involved in the development game, they assure me that the short-term constraint on big developments is financing. People have more or less shovel-ready infill projects and they need a loan. Some evidence for this is provided by the fact that there've been a curious volume of large 100% equity projects undertaken recently. What people say is that there's too much liquidity risk to go into big things. Why exactly that should be the case isn't quite clear to me. But on some level, I think it does come back to monetary policy.

Specifically, we're still stuck with the Fed's ambiguous communications strategy. What they ought to be saying is that interest rates will stay low for a while come hell or high water. But what they are saying is that they're very sure hell or high water won't occur, so interest rates will almost certainly stay low for a while.

That's confusing. The sub rosa messaging through the press says it's supposed to be a strategy for getting us out of depression, but the above the line statement reads like a promise that the depression will continue. It's confusing, and the more you discuss it with the relevant people the more confused you get. Resolving the land use and permitting issues would help short-term and it's very important for the long-term, but on a national basis we really need a better FOMC statement. Confusion promotes a high preference for liquidity which makes it difficult to finance anything large. Alternatively, in the magical dreamworld where Congress actually does things it could pass a loan guarantee program.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.


Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

Trending News Channel
Sept. 19 2014 1:11 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Sept. 20 2014 11:13 AM -30-
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
Brow Beat
Sept. 21 2014 12:43 PM Watch Rachel Dratch and Tina Fey Do a Second City Sketch in 1997
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 21 2014 8:00 AM An Astronaut’s Guided Video Tour of Earth
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.