In 1950, New York held 7.9 million residents. Today, after seven decades of economic growth, the city's population sits at roughly 8.2 million. In Chicago, population numbers fell by nearly a million over the same period. While rapidly growing cities across Asia and Latin America built apartment blocks to house millions of incoming workers, major American cities kept their physical structures largely unchanged.
This failure to build matches a steep drop in housing affordability. Across the United States, average home prices grew tenfold over the past 50 years. Renters routinely spend more than half their monthly pay cheques on housing, while the median age of first-time homebuyers reached record highs. The explanation for this shortage is straightforward: local governments spent a century passing laws that made new construction illegal.
The origin of legal restrictions
The policy framework began in 1916 when New York City introduced the nation's first comprehensive zoning code. Commercial landlords lobbied for strict height limits and building setbacks because a boom in early skyscraper construction threatened to flood the market with office space and push down rents. City records from 1916 show that within months of the law passing, 99 per cent of new building proposals faced regulatory objections. Landowner associations publicly welcomed the restriction on new construction, noting that reduced supply protected their rental revenues.
In California, Berkeley passed single-family zoning laws during the same decade. Local homeowner groups pushed for rules that banned multi-family apartment buildings. The explicit aim was keeping out working-class families and minority residents who relied on rental units, achieved by requiring every home to be a standalone building on a private plot.
By the late 20th century, these restrictions expanded through historic preservation laws and environmental regulations. In 1981, New York designated nearly all of Brooklyn's Clinton Hill neighbourhood as an historic district, requiring property owners to obtain municipal permits before altering any exterior detail. In Manhattan, strict building codes mean that roughly half of existing residential structures could not be legally constructed today.
Process as a barrier to construction
Discretionary planning rules gave existing homeowners broad power to stall housing. Under state planning laws passed in the 1970s, environmental impact reviews became standard tools for neighbourhood groups. In Los Angeles, a proposal to build apartments on an abandoned industrial site spent 30 years in litigation after local residents filed repeated environmental challenges. In northern California, suburban councils used habitat protection rules and open-space mandates to stop apartment developments on existing parking lots.
These administrative delays carry high costs. Developers must pay interest on land loans and retain legal counsel through years of public hearings. Many projects go bankrupt before breaking ground. As a result, per-capita home construction in the US dropped to historical lows following the 2008 financial crash.
When housing supply is blocked, market pressures push prices up across every income bracket. Wealthier households unable to buy new flats buy older housing instead, outbidding lower-income residents. Economists refer to the opposite effect as "filtering": when cities permit high-density developments, affluent buyers move into new units, freeing older housing stock for lower earners.
Housing as an investment vehicle
The reluctance to build reflects a policy choice about the purpose of residential property. Federal tax codes offer mortgage interest deductions and property tax write-offs, encouraging citizens to use primary residences as their main retirement assets. For home values to rise continuously, supply must stay limited. When neighbourhood associations attend planning meetings to oppose new flats, they act to protect the financial returns on their property.
Politicians frequently offer down-payment grants or low-interest loans to assist buyers. However, subsidising demand without expanding housing supply simply raises purchase prices further. Similarly, rent controls protect existing tenants from displacement, but fail to resolve the underlying shortage of physical homes across a city.
Reforms are beginning to occur at state level. Over the past three years, legislatures in Washington, Oregon, and Montana repealed single-family zoning rules and streamlined environmental review procedures. In cities like Austin and Minneapolis, where multi-family construction accelerated, average rents dropped or stabilised below national inflation rates.