In many Western countries, soaring rents have become explosive political issues. Tens of thousands have taken to the streets in Germany, Spain, Italy and Portugal to protest rising housing costs. In Berlin, the far-left party Die Linke won an election with a campaign centered on housing affordability, including its demand to expropriate large residential property companies.
In the United States, the issue is no less urgent. According to an October 2026 Pew Research Center survey, 66 percent of Americans said they were “very concerned” about housing costs. Housing affordability also played an important role in the midterm elections. According to a Clever Real Estate survey, 85 percent of respondents considered housing affordability important. Socialist Zohran Mamdani made the issue central to his successful campaign for mayor of New York City. According to CNN, 72 percent of New York City voters said housing costs were a major problem.
Yet the solutions favored by voters are often precisely those that economists warn against. Most Americans want more government intervention, particularly rent controls. According to an Ipsos survey published by Redfin, 76 percent of Americans agreed that “There should be caps on the amount landlords are allowed to increase rent.” This view was shared by 83 percent of Democrats and even 72 percent of Republicans.
Economists take a very different view. In July 2024, the University of Chicago's Kent A. Clark Center for Global Markets surveyed 45 prominent economists from leading American universities as part of its Economic Experts Panel. When responses were weighted by the confidence economists expressed in their answers, 72 percent agreed that nationwide rent caps would substantially reduce the supply of rental housing over the following decade.
The empirical evidence reinforces this skepticism. In a comprehensive review of 206 studies on rent control, economist Konstantin Kholodilin found that rent regulations may benefit tenants already living in controlled apartments, but often impose substantial costs on everyone else. Studies examining spillover effects almost unanimously show that rent controls drive up rents in the unregulated market. They also tend to discourage investment, reduce housing supply and worsen shortages.
Why, then, do voters continue to demand policies that economists overwhelmingly regard as counterproductive?
Christopher S. Elmendorf, Clayton Nall and Stan Oklobdzija offer a revealing answer in their paper, “The Folk Economics of Housing,” published in the Journal of Economic Perspectives. Conventional explanations focus on homeowners who resist new construction because they fear it will reduce their property values. But the authors argue that this explains only part of the problem. A more fundamental obstacle is that many Americans simply fail to understand how supply and demand work in housing markets.
Significantly more respondents expected an increase in housing supply to drive housing costs up rather than down. Yet when respondents were presented with similar scenarios involving other goods, they were much more likely to understand that increasing supply tends to lower prices. In other words, people who understand the basic economics of supply and demand when it comes to ordinary products often abandon that reasoning when it comes to housing.
The researchers also found that developers and landlords were among the groups most frequently blamed for high housing prices. This helps explain why political attacks on property owners and developers resonate so strongly with voters. For the political left, the appeal is obvious. It is easier to blame unpopular landlords, developers and investors than to explain the complicated economic forces driving housing costs. Scapegoats make for effective political campaigns. Supply-and-demand curves do not.
In reality, rising housing costs have multiple causes. Federal Reserve interest-rate policies affect financing costs and housing demand. Restrictive zoning laws, minimum lot sizes, density limits and building-height restrictions prevent developers from responding to rising demand. Excessive building regulations make construction more expensive. Immigration, including unauthorized immigration, can further increase demand for housing, particularly where new construction is constrained.
These factors differ in importance across cities and countries. But one common thread runs through many housing crises: Government policies restrict supply, while politicians blame the resulting high prices on the very people who could build more homes.
Conservatives and libertarians have made a serious political mistake by largely surrendering the housing issue to the left. They have allowed politicians who advocate more regulation to present themselves as defenders of tenants and prospective homeowners, even when their proposals threaten to make housing less affordable.
The economic case for a different approach is strong. Instead of imposing more rent controls and restrictions on developers, governments should remove the barriers that prevent housing supply from responding to demand.
The housing crisis is not evidence that markets have failed. In many places, it is evidence of what happens when governments prevent markets from working.