The Washington Post, Oct 17, 2019: Economists Identify An Unseen Force Holding Back Affordable Housing
When the smoke cleared after the Great Recession, the home builders who survived were in a surprisingly strong position. They had fewer competitors and more power in their local markets. They have since built on that advantage, consolidating until many markets are controlled by just a few builders. Their power has exacerbated the country’s affordable-housing crisis, some economists say.
U.S. housing debates rarely involve the “O” word. But oligopolies, a cousin of monopolies in which a few powerful players corner the market, are emerging everywhere. From 2006 to 2015, the number of builders who controlled 90% of a typical market dropped by a quarter, according to a recent working paper by economists Luis Quintero and Jacob Cosman of Carey Business School at Johns Hopkins.
The economists find this dwindling competition has cost the country approximately 150,000 additional homes a year — all else being equal. With fewer competitors, builders are under less pressure to beat out rival projects, and can time their efforts so that they produce fewer homes while charging higher prices.
