Can Deregulation Help Solve the Housing Crisis?

I’ve never been to Austin, Texas, but I’ve always heard it’s a fantastic place to live. It’s a city known for its vibrant culture, live music scene, and growing tech industry. I do plan to visit one day. However, one thing I’ve consistently heard is that Austin is an expensive city to call home.

Recently, I came across some news in a Morning Brew story that caught my attention. It revealed that rents in Austin have plummeted by 22% from their peak in 2023. What’s even more surprising is the reason behind this drop—city-led regulatory actions. By streamlining the permit approval process and relaxing building height restrictions, Austin spurred a surge in apartment construction, leading to an oversupply and, consequently, lower rents for residents.

According to Morning Brew, Austin embraced a “build more, lower rents” approach, which resulted in the addition of 50,000 new housing units between 2023 and 2024—a 14% increase, the largest supply spike of any U.S. city during that period. As a result, the median asking rent in Austin has dropped to $1,399, down $400 from its peak during the pandemic. Rents have fallen so significantly that Austin, once Texas’s priciest city, has been surpassed by Dallas-Fort Worth.

In 2022, I shared information that Regulation Accounts for More Than 40% of Multifamily Development Costs, based on research conducted by the National Association of Homebuilders (NAHB) and the National Multifamily Housing Council (NMHC). The findings highlighted how regulatory burdens—such as changes to building codes, site work costs, and development requirements—significantly drive-up construction expenses. New research conducted by economists from MetroSight confirmed that this is still the case.

Here’s the full report.  

For years, the multifamily and rental housing industry has argued that excessive regulations contribute to the housing affordability crisis. Austin’s case reinforces this point: when governments remove unnecessary and duplicative regulations, housing supply increases, and costs decrease. If we’re serious about making housing more affordable, we must rethink the regulatory landscape.