The market theory of supply and demand was popularized by Adam Smith in 1776. It is still considered a reasonable way to partially explain economic behavior in many instances today.
The Housing Myth
However, the myth that needs to be debunked is the notion that if city councils in Colorado and the US do whatever housing developers recommend, that developers will in turn produce an unlimited supply of new housing and that the resulting inventory of homes will become so large that prices will become affordable at all income levels. As a result, the severe shortage of affordable housing will disappear.
You may laugh and say nobody would ever believe anything so silly and extreme. If that is what you say, you have probably never logged in to Nextdoor or Reddit where adherents to this supply-side delusion are always ready to pounce.
The reason that this supply side excess will not happen is that housing developers monitor market and economic indicators and adjust output based on them. Developers will never endlessly build, build, build just because they get their way with the naive, misinformed or corrupt city councils that some cities may have elected. Adam Smith described this process of adjusting output as markets finding equilibrium. You will probably never find a supply-side shill on social media that knows about equilibrium.
The chart below proves that builders respond to economic conditions and have greatly reduced their output in 2024 as conditions including interest rates have become more negative for apartment and home construction. Despite the fact builders have radically reduced their output, they continue to push for major give-aways to builders such as construction defect amnesty, relief from providing minimum parking for new units, etc.
In Denver, construction starts have declined almost 90% from 8,586 in 2023 to only 982 in 2024.
What this means is that city councils that are rolling back housing protections and city traffic and livability standards to favor developers’ bottom lines are getting nothing in return in terms of increased housing supply or affordability.
Unfortunately, the myth is frequently perpetuated on social media sites such as Nextdoor, Reddit and others which some people regard as reliable information sources.
Stay Smart
So please don’t believe the myth that building more and more unaffordable market priced housing units is the solution to the affordable housing shortage.
Also, keep in mind that when new housing is built in urban infill locations, it is often necessary to demolish older, more affordable housing which makes the affordable housing shortage even worse.
Obviously, building the very nice, market priced units proposed at Belmar Park West will do nothing to address the shortage of affordable or low-income housing.
So when the sirens are singing the Build, Build, Build song, don’t join the choir. And don’t listen to the song. Instead, get the facts.
