That is only if you believe that more capacity does not induce more demand, which really isn't true as long as the city remains popular for jobs/climate/nature/etc.... People not moving to Denver because the rent is too high will decide to move to Denver if rents decrease (and the demand they add will cause rents to increase, wash/rinse/repeat until an equilibrium is reached). You also have cases where a city becomes even more attractive because of growing density alone (NYC, Hong Kong, Tokyo).
"Everyone would move to ________ because it is the best place in the spiral arm of the Milky Way", where ________ is Boulder, Bend, Austin, Portland, San Francisco, Santa Barbara, Hawai'i, Santa Fe, etc.... etc....
It cannot be true for all of them. So they all need to build and people will figure out where they actually want to live.
Bozeman, Montana, a small city of 50K people, is seeing falling rents because they built a lot of housing:
https://montanafreepress.org/2025/06/23/has-bozemans-rental-...
And it's very much the kind of small place where "everyone wants to live there".
If you have fixed demand, then you can definitely "build" your way out of a housing crisis. Bozeman, for example, doesn't have many jobs, so you can't really live there if you don't bring your own money. A big city like Seattle or Denver... they have lots of jobs, so they will grow at least to the point that all those jobs have people working them...but then a city like that attracts even more jobs (the way cities work since they concentrate talent, which attracts more businesses looking for that talent), more people, it could grow from a million people to 10 or 20 million easily.
> And it's very much the kind of small place where "everyone wants to live there".
MT is a bad place if you need to work for a living: high housing prices, jobs don't pay very well if you can find them at all. My mom moved to Helena in the late 90s and found that out first hand. If WFH took off as expected, then you definitely could make a good life in Bozeman or Missoula or Butte, but alas, the opposite happened and we regressed greatly.
Same thing happened in Austin, Texas, which is a much bigger city with lots of jobs.
The underlying story is that building enough housing is a good way to fix a shortage of housing, which is what causes high prices.
Best is different for different people. Some people it means close to beaches, for other it means cultural institutions, for others it means lots of tech companies, for others it means wide open spaces.
Land is eventually limited, but there is tons of variety available of what people like.
I moved from midtown Manhattan to western Wyoming. People have diverse preferences. (Even if we assume uniform preferences, densifying the population into a few cities so we can reclaim our wildlands sounds like a dream.)
Globally, demand isn't even fixed. It's proportional to the population size, which we would expect to shrink.
The only way this could work in the opposite direction is that you build enough that it becomes feasible for everyone to live in a few supercities where demand keeps growing due to network effects, and the supply outside of the supercities is useless.
I don't think that's how the theory is supposed to work. It's more along the lines of, if you build more housing in a place then more people live there and then the higher population density can sustain more shops and jobs, and then people want to live near shops and jobs so the local demand increases.
There are two reasons the theory doesn't actually mean that you can't solve the problem with more housing.
The first is, the effect isn't infinite. As the reductio, if the entire New York Metro area had the population density of Manhattan, it would house 450M people, which is more than the entire US population. So you can build more housing than you have people to move into it even if that would literally cause the entire national population to move to the same place, and of course building that much housing in one place wouldn't cause literally everyone to move there anyway, so the amount you need in practice is far less than that.
And the second is, it's a local effect that comes from net migration. If you build more housing in Denver and that causes people to want to move from Austin to Denver, even if you don't build enough to overcome that in Denver itself, you'd still be lowering housing costs in Austin. And if you're simultaneously building new housing everywhere then there is no net migration and therefore no induced demand anywhere.
https://www.reddit.com/r/AskEconomics/comments/y3ywl2/why_wo...
Affordability and desirability are always going to be in constant tension, and any given change - including construction - can tip things more one way than the other. The long-term affordability trends are poor even in states like Texas - is that purely because of construction? No, it also has to do with policies like trying to poach established businesses from other states and importing wealth and high salaried individuals. But it shows that development is no panacea and that even in areas with more open land to build more new construction on there are still powerful trends in the US towards sprawl, low-to-medium density, and rising cost of living. Without explicit intervention like subsidies or direct government construction development will slow - focusing on higher-ROI units for the same spend vs pure unit count - as developers worry more about not being able to command the per-unit price they want if they were to aim for quantity.
I don't believe this is true, assuming scarcity = shortage. Ad absurdum, if Denver overbuilt such that one could pick up a parcel for a song, you'd see opportunistic demand where there previously was none.
Here's a listing for a parcel for $9000, that's been listed for over a year[1]. Denver seems like a nicer place than Detroit, IMHO, but it's possible for there to be more supply than demand.
I suspect at 5% annual growth in units, you would be able to reach the point where there's not enough demand for builders to recover costs. It might take a few years, depending on just how much unmet demand there is.
[1] https://www.redfin.com/MI/Detroit/1752-W-Canfield-St-48208/h...
The inverse of this situation is that everyone lives somewhere they consider unpleasant because the rent is affordable there.
The megacities you mention are enormously economically productive per capita. All sorts of efficiencies pop up when a huge number of people live near one another.
It isn't a bad thing. NYC and Hong Kong are nice cities, they should exist. But don't expect housing prices to fall because you add more density if demand isn't fixed, the opposite often happens instead (people want to live in megacities even though housing costs are high). And that isn't really a bad thing, like gentrifying a blighted neighborhood will drive up housing prices as well.
No, it doesn't. What you're describing is elasticity. It's a well-studed concept, and means that a 5% increase in supply will probably reduce prices by less than 4.8%.
(An interesting side effect of a government committing to a zero real-price increase housing strategy is it eliminates whole categories of speculative demand. I wouldn't count on this for policy effects. But it's another feather in the cap for pro-housing policy.)
I would imagine for most people, this is what "solving the housing crisis" means
Now the folks in Denver who hadn't considered Austin due to high rates can move there and reduce the costs in Denver again.
Cheaper homes may induce demand, they won't induce a 5% growth rate.
Only if population is held constant.
Housing supply is inelastic, but housing demand is somewhat elastic. As seen in Denver, an increase in housing supply would decrease prices. But those lower prices will increase demand from people that want to live in Denver but previously couldn’t afford it.
We don't have an infinite number of people available to move into housing. There are only a certain number of people who will want to move into a particular region, and that number will stop growing at some point.
Granted, you don't want to build too much and end up with a ghost town. There's a balance to be maintained, and I think housing should be affordable, not a race-to-the-bottom cheap as possible.
Except, it's not. Where would all of these extra people come from?
More to the point, Denver is already quite expensive. Where are you going to find another 230k people capable of paying even higher rents than folks do today?
Denver hasn't been that place for more than a few decades. Heck, the whole rocky mountain region has never ever been a place for cheap housing. Western housing prices are high historically for reasons related to desirability. They never were as cheap as the midwest or deep south.
