Why the Housing Crisis Demands Local Government Action

We all remember supply and demand from high school economics. In today’s U.S. housing market, both of those forces have shifted dramatically. The result? Higher prices, higher rents, and growing consequences for communities nationwide.

Understanding these changes is essential for local governments, developers, and community leaders seeking to make smart, forward-thinking decisions.

Demand Is Up, Here’s Why

Over the last few decades, demand for housing has surged. Several factors are driving this trend:

• Baby Boomers aren’t downsizing. Many are staying in their primary homes longer than expected and even investing in second homes for retirement or vacation.
• Millennials are entering the market. The children of Boomers (another large generation) are starting families and buying homes, increasing demand even more.
• Economic growth continues. Incomes and productivity gains have enabled more people to afford (or try to afford) homeownership.
• COVID changed the game. The rise of remote work emphasized the importance of having a comfortable, functional home. Even as work-from-home declines slightly, the impact remains: people want more space, home offices, and better school districts.

Supply Is Lagging Behind

On the supply side, technological innovation should have helped increase housing availability. But in reality, several roadblocks are slowing that growth:

• Capital is going elsewhere. Even with low interest rates, investment dollars have flowed into tech, clean energy, healthcare, and other sectors - not housing.
• Construction bottlenecks. Global supply chain disruptions, environmental regulations, and tariffs have made it harder and more expensive to build.
• Local restrictions are a major barrier. Zoning laws, NIMBYism ("Not In My Backyard"), and BANANA attitudes ("Build Absolutely Nothing Anywhere Near Anyone") make it difficult to add new housing stock.

The result? Rising housing costs, both for buyers and renters.

What Happens When Supply Falls Short

When housing demand keeps rising but supply can’t keep up, communities experience a cascading set of problems:

• Rent and home prices increase.
• More people become rent-burdened, meaning they spend more than 30% of their income on rent.
• Property crime and homelessness rise.
• Local budgets are strained. Spending goes up (law enforcement, public health), while revenue goes down (falling property values and lower tax revenue).

According to our research, a 1% increase in the rent-burdened population leads to a 9.5-point increase in property crime per 100,000 residents.

Let’s break that down. In a city like Indianapolis, with around 880,000 people and a rent-burdened rate of 48%, just a 1% increase in that rate could lead to 80 more property crimes per year. That’s a major cost in police time, insurance claims, and public safety.

The Smarter Strategy for Cities

The evidence is clear: Communities must take proactive steps to expand housing supply. If developers are ready to build and the rent burden is on the rise, the better option is to address restrictive zoning policies, counter NIMBY narratives, and greenlight new housing.

Why? Because the cost of not building is far greater - in dollars, in public safety, and in community well-being.

Polco Can Help

Polco’s suite of housing and budgeting tools, like our Housing Simulation, Budget Simulator, and Rent Burden Reports, can help communities:

• Understand where and why housing demand is rising.
• Engage residents on zoning and housing plans.
• Simulate trade-offs and educate the public on policy impacts.
• Make data-informed decisions backed by national benchmarks.

With the right tools and political will, local leaders can tackle housing challenges head-on, and build stronger, safer, more equitable communities in the process.

Need help visualizing rent burden or simulating zoning decisions in your city? Contact Polco to see how our tools can support your goals.