Housing Supply

Housing Supply Dynamics

Housing is durable, and housing supply relies on the durability of housing to explain its persistence as an economic indicator. Existing housing units that are stable and actively engaged in the market, whether owner occupied or for rent, contribute to housing durability and account for a much greater percentage of the housing supply than do newly constructed units. The durability of the housing supply notwithstanding, temporal trends relating to movements between value appreciation and depreciation, value pricing and rent levels, quality and physical condition degradation, new construction and the loss of units, population and demographic diversity, and natural and regulatory constraints can be either, all or independently, positive or negative adjusters in determining the elasticity of housing supply.

By definition, housing is not a true commodity, however. Unlike gold, copper, and pork bellies, which are always distinguishable as gold, copper, and pork bellies, housing has no distinct identity due to the wide variety of types, structural formats, ownership and investment arrangements, and other features that differentiate the heterogeneity of housing. Housing heterogeneity, as a characteristic of housing supply, parses housing into a proper order of utilitarian arrangements that establish whether housing units are available for use in the market or simply inert structures that have no residential application or investor value. The elasticity of housing supply in urban economies and the manner of the concomitant availability of residential housing units, when combined with increased consumer interest, can have a positive impact on the real estate market, but this outcome does not lead to a corollary resulting in the commodification of housing. Apart from whether the quantifiable supply of housing in the market may be as high or as low as consumer demand, the reality is that the actual quantity of available housing within an urban area must be sufficient to accommodate the diverse needs, interests, and economic capacity of the consumer population of that urban area. This reality, alone, is important in determining the equilibrium of housing supply in the market.

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