We are currently in the midst of a crisis. It’s not an invasion from a foreign threat or an internal civil war pitting brother against brother. This current crisis strikes in the form of unaffordability. More specifically, it exists in the incredibly high cost of one of our core necessities: we know it as the Housing Crisis.

To get a visualization of how dire the Housing Crisis is, as of December 2024, the median cost of housing in the United States was 427,388 USD, a 6% increase from 2023. In contrast, the median income of a household in 2023 was just 80,610 USD. That ratio of median home prices to incomes is, as it stands currently, a staggering 5.3 to 1. Combine this with all of the other expenses an average household needs to focus on, and the amount of time and effort it takes to buy a home is crushing to the common man.

This issue isn’t just limited to buying a home, however; renting is incredibly expensive too. As of this year, the average monthly rent for a unit of housing is roughly 2,000 USD, or 24,000 dollars in a year. That’s roughly 30% of the median household income, a staggeringly burdensome amount.

The incredible risk posed to the socio-economic well-being of the people by the Housing Crisis leaves us with an important question: What’s causing housing to be so scarce? That is what this article sets out to answer.

There are two ideas that complement each other tremendously and fully complete the synthesis of efficient and consistent housing construction. One has gotten extremely popular, even pushing entire states into adopting it, but it hasn’t lived up to its full potential. The reason for that lies in the fact that the other half of the key is still lost to common knowledge. Before we can dive into that, let’s take a look at the popular and commonly understood half.

The YIMBYs and Upzoning

The YIMBY (Yes In My Backyard) movement has been one of the main groups advocating for reforms to solve the Housing Crisis, in particular zoning reform. Most areas of the United States currently use single-family zoning, where only housing units that accommodate just one family are allowed to be built on a plot of land. This style of zoning, which was protected by the Supreme Court in the Euclid v. Ambler case (giving rise to its alternate name, single-family zoning), has now permeated its way into many nations’ understanding of suburbia.

Needless to say, the extremely restrictive nature of single-family zoning has caused many problems, primarily the incredibly inefficient land use caused by preventing denser developments than just single-family homes. Seeing as how land is necessary for life but non-reproducible, it being used inefficiently cannot be afforded. It is in solving this problem of inefficient regulations where the YIMBYs step in.

The YIMBY movement has tirelessly dedicated itself to reversing this mistake, advocating for zoning restrictions to be loosened to spur more flexible construction. In turn, developers would be able to build more on and use land for denser and more efficient housing.

Zoning reform is, of course, the first step towards solving the Housing Crisis. Simply opening the way for land to be used more efficiently is necessary for, well, efficient land use in the form of more housing where people desire it the most. In this vein, developers in more loosely zoned areas should have the freedom to build as much as they can and fully end the Housing Crisis.

However, there have been some problems in the process of building after rezoning. The issue is that the equation is incomplete. YIMBYism primarily deals with the end goal of being able to build. But the other half of the housing equation, the process, still needs ironing out.

The Problems Holding Back Upzoning’s Potential

While upzoning opens the way for the market to build more dense and efficient housing, rezoned areas may not get the level of development they are due. There are a few reasons for this.

1. The High Upfront Price of Land: Land is costly. In many of the United States’ most valuable cities, it makes up over half of the cost of real estate. This presents an enormous barrier of entry for developers looking to buy land to build homes, as the high cost of land cuts into its accessibility, preventing homebuilding from happening in the first place.

In Australia, for example, the median price of land has risen faster than overall inflation and construction costs, showing land costs to be one of the most prohibitive barriers to development.

As society continues to progress and enhance its productive capabilities, this problem is only going to get worse for development. In the example given this is indicated by the highest land price rises occurring in Australia’s major cities, the hub of the country’s growth.

2. Profits from Withholding the Land: Another huge barrier to housing construction is being able to profit off withholding land, rather than using it for housing and putting it on the market. An example of this can be found in the land down under in Australia’s master planned communities (or MPCs for short). In 2022, Prosper Australia released a report detailing the extent of new housing built within these communities, including on rezoned land. What it found was that about 76% of the land within these communities where housing was permitted to be built was still vacant after almost a decade.

Instead of building housing in a timely manner to offset the incredibly high prices of homes within these MPCs, the report found that the developers who were tasked with building up these MPCs only did so when land prices were booming. In doing so, developers maximized their profits, but not through producing and providing housing.

Instead, much of the profits came from withholding building-permitted land even if it meant sacrificing much needed and timely development. The land-related issues plaguing timely developments aren’t just limited to the developers themselves too, there is also the added problem of NIMBYs (Not In My Backyard) advocates who fight developments tooth and nail.

The reason for this also lies in the land, as NIMBY interest groups can continue fighting development without getting a run for their money, as their ever-appreciating land value is never taxed away as compensation to the society they exclude. Without having to worry about taxes on their ever-increasing land value, NIMBYs can maintain their power while everyone else suffers.

3. Taxes on Building and Materials: To further add injury to the already injurious land problem, taxes on buildings and other production further weigh down the process of making and selling new housing.

From our current backwards system of property taxation which punishes actively keeping buildings maintained to more indirectly harmful taxes like tariffs on building materials used for housing, our current tax system stymies the act of building up and providing goods and services to others. In turn, the profits from homebuilding are cut drastically, further hiking costs and reducing supply.

In essence, being able to profit off the land freely, and losing profits to taxes on producing and providing buildings means housing isn’t created as fast as it can or should be.

The solution to this is finding a way to charge owners for the time they get to own a plot of land by taking away the profits of its non-reproducible nature, spurring its development and discouraging speculating on it, and then using the proceeds to end all taxes on the production and sales of new housing. This is where the second half of the Housing Crisis’ antidote steps in.

The Georgists and Tax Reform

Sitting in another, worse-lit area of the discussion around ending the Housing Crisis are the Georgists. Georgists are mainly concerned with one thing, shifting the burden of taxation from the earned income of producing and trading goods and services to the unearned income of controlling resources which are non-reproducible, setting the incentives right in a general market system to encourage profiting off the former while discouraging profiting off the latter.

As we discussed in the last section, the reason why upzoning may not be at its most efficient is because the high cost of both land prices and taxes on building makes the timing of development slower than it truly should be.

As it relates to adequate housing, Georgism solves the problem by taking the burden of taxation and shifting it from the buildings and putting it on the land instead.

This works double duty in shifting the incentives around housing construction: first it lets developers build without the fear of added taxation. Secondly and perhaps more importantly, it also reduces the upfront price of land charged by the landowner and turns that lowered price into increased taxes paid by the landowner.

Landowners can’t charge as much out of society upfront if society knows they’ll pay the land value as a rolling tax instead.

By shifting the source of real estate profits from holding on to land to producing and using buildings, development in upzoned areas would be heavily focused on building housing quickly to offset the hot potato that is the land value tax as fast as possible.

Indeed, where the YIMBY movement succeeds in opening up the market to allow efficient land use and extensive housing construction by removing the regulations blocking them, the Georgists make the process of reaching that goal as efficient as possible. Thus, YIMBYism and Georgism together are the two necessary halves of the whole package which can bring housing to affordable levels.

A Real-Life Success Story: New York City in 1920

A real life example of a city that suffered a Housing Crisis pre-dating the rise of single-family zoning was the Big Apple itself in the 1910s.

I’ve already written an article about this topic, so I’ll spare you the details, but New York City prior to 1920 was suffering a housing crisis so bad that it called for a special legislative session by New York’s then governor Al Smith.

Following some heavy activism by the Georgist clubs in the city, Smith and the city’s tax assessors made a few changes. They first exempted new construction from New York City’s property tax up to a set amount, but not the land underlying those constructs, a massive shift from property taxation to a land value tax. Second, they upvalued land while downvaluing buildings, indirectly increasing the land value portion of the tax while decreasing the building portion.

What followed this was a housing boom coinciding with the roaring 20s, where about 740,000 housing units were built for a population of about 5.6 million. Compared to today, the ratio of new units to population was far higher in Smith’s time than it was in ours and was enough to offset the high costs and cramped living of the time preceding him and single-family zoning.

Conclusion

YIMBYism and Georgism work best when practiced together. Georgism fast-tracks YIMBYism to provide housing and lower costs of living as quickly as possible, and YIMBYism opens the way for Georgism to provide efficiently used land in the form of denser housing than in our current system.

Unfortunately, the two ideas haven’t grown popular politically together. The YIMBYs have made great strides in encouraging zoning reform to open the market up, but the Georgists haven’t been able to get as much traction.

However, as more criticism is drawn to the eyes of rent-seeking, in the case of this article from treating housing as an investment instead of a home through untaxed land values, the winds of change will hopefully blow in the Georgists’ favor. In turn, the Georgist movement may gain the momentum necessary to join the YIMBYs in popular reform, and end the war against unaffordable housing for good