Foreign funds help make housing unaffordable: research

The study reveals that foreign investment in US housing rose after 2011, when Singapore implemented a tax on foreign homebuyers, prompting international buyers to seek alternative markets. The US, with its high immigrant populations and lack of tax on foreign investment in housing, became an attractive destination. As a result, areas with more foreign-born residents experienced housing prices 6.7% higher than other neighborhoods in the same city, while housing supply grew only 1% in those areas. This disparity is particularly evident in cities like San Francisco, where a 1% increase in prices leads to only a 0.06% increase in supply, in contrast to cities like Charlotte, North Carolina, where increased demand generates more supply.

The research underscores the significance of municipal control over housing, highlighting the importance of revising zoning laws and permitting processes to promote affordable housing. For instance, Baltimore's housing market, which was found to be the most elastic in the country, had overhauled its permitting process during the mid-2010s, demonstrating the impact of local regulations on supply sensitivity. This finding suggests that cities have a crucial role in addressing the issue of housing affordability.

The study's implications are particularly relevant in the context of the ongoing trend of people moving back into urban areas, reversing the suburbanization trend of the latter portion of the 20th century. As demand for housing continues to rise, cities must find ways to balance prices and supply. The research emphasizes that municipalities have control over a significant portion of their supply sensitivity, and it is up to them to implement policies that promote affordable housing.