Henderson Review of Build, Baby, Build

Often when I advocate abolishing a particular regulation, I’m accused of thinking that my proposal is a panacea. Usually, that’s false: I point out that it would move things in the right direction but that it’s not close to being a panacea.

I’m guessing that for most policies he advocates, Bryan Caplan has the same reaction I have. But he makes the case that housing deregulation is indeed a panacea. He argues strongly, with data, that deregulation would reduce the cost of housing, and thereby reduce poverty, reduce income inequality, reduce traffic congestion, restore the geographic mobility that we older people experienced in the 1970s when we were younger, provide construction jobs, and even reverse the decline of fertility.

A conservative estimate, states Caplan, again backing it up with data in the footnotes, is that housing deregulation would reduce the cost of housing by approximately 50 percent. Because housing costs are about 20 percent of the average American household’s budget, the cost of living would be 90 percent of what it is now, which means that the standard of living would increase by 11 percent (100 divided by 90 = 1.11.)

The effects of deregulation would be bigger for lower-income people, notes Caplan. The reason is simple: lower-income people spend a bigger share of their income on housing. That means also that deregulation would reduce income inequality.

This is from David R. Henderson, “Build, Baby, Build,” Defining Ideas, June 20, 2024. It’s my review of Bryan Caplan’s book of the same name.

Read the whole thing.