This is our third post in our series examining America’s housing crisis. We’ve explored housing types and how policy decisions created today’s emergency. Now we examine why market-based solutions alone cannot provide affordable housing for those who need it most.
One of the most commonly oversimplified answers to America’s housing affordability crisis is: simply build more housing. This answer suggests that increasing supply through market-rate construction will solve the problem. When we delve further into this solution and combine it with relaxed zoning, we will eventually make housing affordable for everyone through a process known as “filtering,” where new luxury housing allows middle-income residents to move up, thereby freeing older units for lower-income households. While the intent is good, the reality supports a different outcome. Simply put, in the U.S., housing is an investment designed to generate maximum profit in the free market.
For the millions of Americans facing the most severe housing needs, relying primarily on private development to solve affordability represents a fundamental misunderstanding of how housing markets actually work, and that, for many, the free market is simply out of reach.
The Myth of the Free Market
It used to be that when one rented a house on the free market, they did so directly from the property owner, also known as a mom-and-pop owner. These days, this scenario is increasingly rare as large corporations buy up large swaths of rental units around the country. These corporations then put these rental units under a limited liability corporation or a trust to protect the parent company. With this structure in place, the corporation-owned units are now open to a slew of tax breaks, cuts, and incentives that are not dependent on the condition of the unit or the treatment of the tenants.
In the book, Lessons from Eviction Court, Fran Quigley shares how this set-up keeps those who are most economically disadvantaged on the brink of housing insecurity. When these corporations approach housing as a business, their goal is to maximize profit, which often means spending as little as possible, forgoing routine maintenance, and failing to comply with codes, all while generally compromising the safety of the units. Many tenants live in these units because they simply cannot afford the rent elsewhere, and they’re trapped in substandard and sometimes dangerous living conditions.
When tenants withhold rent in these situations, eviction proceedings often begin in earnest. Quigley, a practicing eviction attorney in Indianapolis, shared in his book that some landlords begin the eviction process in as little as one day after a rent payment is missed. He goes on to state that some companies are so quick to evict because they view the money from the eviction process, where the tenant ends up paying back rent, lawyers, and court fees as another stream of revenue for the company, all while exploiting the tenant. In the state of Indiana, an eviction can be completed in as little as five days, Quigley states in his book. He gives multiple examples of real cases where renters were simply stuck, living in squalid and unsafe conditions. Still, they stayed in these units because it was all they could afford, and the only other option was to become unhoused. The rental companies know this and use it to their advantage.
The Mathematics of Unaffordability
So, let’s go back to the answer of simply building more housing.
Housing policy experts who support increasing supply acknowledge its limitations for the lowest-income households. In Quigley’s book, he quotes housing scholars Alex Schwartz and Kirk McClure, who write: “As experts on housing policy, we agree that increasing the supply of homes is necessary in areas with rapidly rising housing costs. But this won’t, by itself, make a significant dent in the country’s affordability problems, especially for those with the most severe needs.”
They go on to explain the mathematical reality: “In much of the country, there is actually no shortage of rental housing. The problem is that millions of people lack the income to afford what’s on the market… In other words, even if landlords set rents at the bare minimum needed to cover costs, with no profit, housing would remain unaffordable to most very-low-income households, unless they also receive rental subsidies.”
This analysis reveals why the filtering theory breaks down for the most vulnerable populations. No matter how much market-rate housing gets built, it cannot bridge the gap between what the lowest-income households can afford and what it costs to operate housing, even without profit. We must also consider who is building these units. If it is the structure that we spoke about earlier, then more housing that is subpar and unaffordable solves nothing.
The Speculation and Vacancy Reality
The “build more” approach also fails to account for how housing operates as an investment commodity rather than purely as shelter. In some American cities, there are more vacant units than unhoused people, yet housing remains unaffordable. Units sit empty while others sleep out on the streets.
This paradox reflects what housing advocates call “safe deposit boxes in the sky,” empty condominiums and apartments held as investments rather than homes. As documented in “Lessons from Eviction Court,” some vacant units result from international money laundering through U.S. residential real estate. In contrast, others remain empty because property owners have “financial reasons to keep units vacant rather than renting them for lower prices.”
This is a case where more housing was built, yet the crisis of affordable housing was not solved; in fact, the opposite has happened.
The Limits of Market Solutions
Some research suggests that zoning changes allowing for more housing construction can have a modest impact on lowering prices. But as noted in “Lessons from Eviction Court,” this evidence also shows that high-end housing development often gentrifies the communities where it’s built, raising rather than lowering costs for existing residents.” Building housing that the neighborhood cannot afford to live in is another way the free market exacerbates the problem rather than solves it.
The fundamental problem remains; even successful market-based approaches primarily help moderate-income households and investors, not those facing the most severe affordability challenges. Urban development scholar Max Holleran explains: “Building market-rate housing is not going to solve the major problems because many people cannot afford the market rate. We need to stop thinking that the market can provide for everyone; it’s just not going to happen anytime soon.”
Looking Toward Solutions
Understanding these limitations doesn’t mean opposing all market-rate construction or dismissing the role private development can play in addressing housing needs. Rather, it means recognizing that housing markets, like other essential services, require significant public intervention to ensure universal access to affordable housing.
The evidence is clear: market solutions alone cannot solve the housing crisis for those who need help most. In our final post in this series next week, we’ll examine how other nations successfully implement social housing alongside market systems and explore the growing momentum in American communities to develop approaches that treat housing as a human right rather than exclusively as a commodity.
