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  • Home
  • About Us
    Our Vision
    BCP’s vision is that free-market municipal policy solutions are broadly available, widely acceptable, and regularly employed, enabling American cities to achieve their full potential as engines of economic prosperity. We reject the idea that cities are lost to free-market principles or policies.
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    BCP uncovers ideas that work, promotes realistic solutions, and forges partnerships that help people in America’s largest cities live free and happy lives.
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    Address

    304 S. Jones Blvd #2826
    Las Vegas NV 89107

    Phone

    (702) 608-2046‬

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    Monday through Friday, 8 a.m. - 5 p.m.

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    info@better-cities.org

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Home Community, Growth and Housing

Why housing efficiency isn’t making homes affordable

Economies of scale work in many industries, but in housing, they often fuel speculation instead of affordability

Patrick TuoheybyPatrick Tuohey
March 11, 2025
in Community, Growth and Housing
Reading Time: 2 mins read
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Why housing efficiency isn’t making homes affordable
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In a recent article on Strong Towns, Charles Marohn challenges the notion that increased efficiency and economies of scale in housing production lead to greater affordability. Marohn argues that, unlike industries such as electronics where efficiency drives down prices, the housing market resembles sectors like healthcare and higher education, where additional liquidity often results in higher costs.

Marohn references the post-World War II era as a period when efficiency did contribute to affordability in housing. During that time, federal programs like the GI Bill and the establishment of entities such as Fannie Mae and the FHA expanded mortgage access, leading to a surge in home construction. This expansion facilitated large-scale production methods, reducing costs per unit and making homeownership more attainable.

However, Marohn contends that the contemporary housing market operates differently. He suggests that increased liquidity now often fuels speculation, consolidates market power, and creates financial instability, resulting in higher housing costs rather than improved affordability.

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This perspective aligns with observations from other analysts. For instance, George Monbiot, writing for The Guardian, critiques the reliance on volume housebuilders who limit construction to maintain high prices, thereby minimizing affordable housing availability.

While efficiency and economies of scale once played a significant role in making housing more affordable, Marohn and others argue that the current dynamics of the housing market require a reevaluation of this approach. Addressing affordability today may necessitate confronting issues like financialization, speculative investment, and the consolidation of market power.

Tags: EconomicsFiscal PolicyHousing Affordability
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Patrick Tuohey

Patrick Tuohey

Patrick Tuohey is co-founder and policy director of the Better Cities Project. He works with taxpayers, media, and policymakers to foster understanding of the consequences — sometimes unintended — of policies such as economic development, taxation, education, and transportation. He also serves as a senior fellow at Missouri's Show-Me Institute and a visiting fellow at the Virginia-based Yorktown Foundation for Public Policy.

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