I would argue that there is a housing shortage in many American cities insofar as there is demand for far more housing than currently exists. The housing would be built y the market if it were legally allowed, or not otherwise strongly disincentivized. As such prices are rising faster than inflation. This tells us that demand outstrips supply.

When demand outstrips supply, one thing that can happen is that prices rise until demand matches supply. That's what is happening now. That's not a shortage.

There are all sorts of restrictions on what type of labor is legally allowed. Age restrictions, hours, licensing, unions, plenty of other regulation. But when there is a story on this site about how employers say there is a shortage of workers, the typical answer is "there is no shortage, raise wages". That's because the typical reader of this site isn't someone trying to run a low margin business, the typical reader of this site is someone who moved to one of the most expensive areas of the world and subsequently realized that for some reason, housing is expensive there, so the government needs to make changes.

But that's not a shortage. Just because you can't afford something at the market clearing price doesn't mean there's a shortage. And just because you can't afford something at the market clearing price doesn't necessarily mean the government needs to make changes. You might need to make changes instead.

> That's not a shortage.

That's literally the definition of a shortage[1], "a condition where the quantity demanded is greater than the quantity supplied at the market price".

> But that's not a shortage. Just because you can't afford something at the market clearing price doesn't mean there's a shortage. And just because you can't afford something at the market clearing price doesn't necessarily mean the government needs to make changes. You might need to make changes instead.

In the case of housing, the government creates the condition whereby there is not enough housing in places where there is the most economic activity. It's a huge drag on the overall economy and well documented.

[1]https://www.investopedia.com/terms/s/shortage.asp

> people who aren't willing to pay the market rate

Or who are unable.

I have a sincere question, though. What about the (potential, I’m still mulling this over) distortion introduced by foreign players flooding the market? I can tell you firsthand that places like Seattle, Vancouver, London, Los Angeles, and New York City experience heretofore unheard-of amounts of money coming in from prosperous but less stable economies like China.

This ignores regulatory barriers that impact costs.

If it costs 500k to permit and inspect a house, you can absolutely complain

Where does it cost 500k for a housing permit?

Soft costs and impact fees for a home in San Francisco or New York can easily be in that range.

Sure, but a permit and inspection does not cost 500K. Making a lot conform might cost that much, sure.

Poster here, 500k was not intended as literal or typical, just and example of how regulatory costs can add to market price.

That said, I have spoken to builders who described city costs of several hundred thousand dollars for renovating or building single family/duplex homes. For start, SF permit costs are a % of construction with 6-9% for the basic permit. If you do the work yourself, you have to pay a % of the market cost if you were to contract it out. Then there are a plethora of additional fees and permits, and you can find some of them here {1}.

I think you are right that the single biggest cost is code conformance, minimum size, construction ect. Some of the requirements are ridiculous. For example California requires electrical outlets every 48 inches along countertops, independent of if I want them at all. This mentality extends to every part of the the permitting process.

https://sf.gov/step-by-step/get-building-permit-house-review

Local zoning means that the supply of housing is artificially constrained far below what would be an efficient use of land. Are you suggesting that labor has similar constraints in carpentry, or just being glib?

Well, immigration laws artificially constrain supply of laborers.