Republicans and Democrats tend to agree on one point in housing: Homes are too expensive for working Americans in many cities.

The conservative-leaning American Enterprise Institute (AEI), however, long has argued that local, state and federal policies over decades created the problem via development-killing laws and by spiking the demand for homes with policies intended to make homes more affordable.   

Rather, AEI argues, all levels of government should focus on strategies that encourage developers and builders to produce affordable homes, addressing the supply shortage.  

Ed Pinto, senior fellow and codirector of the AEI Housing Center, discussed the policy center’s ideas with Scotsman Guide last week. Note that this interview was edited for length and flow.

Estimates on how much new housing is needed vary greatly. Assuming you believe there is a shortage, how many homes does America need to produce?

Well, I do think there’s a housing shortage. It is almost impossible to figure out what the right number is. Just take California. California’s had over 4 million people in net out migration since 1990, yet California has the highest home prices in the country.

California’s housing market is overheating because they have built so little housing since the early 1970s. As a result, house prices have gone up tremendously and there’s a tremendous shortage. That shortage causes people to move in with their parents, it causes people to become homeless.

And so, when you say, well, how many homes do you need? The number gets to be pretty large, even though California has been shedding people and actually reducing population.

You’ve presented some ideas on how to increase the supply of homes, including auctioning federal land for development. You could talk about those.

We call it the ‘housing success playbook.’  Think of it like in football where you have option plays.  The one you mentioned involves auctioning Bureau of Land Management land near cities in 10 states out West: Nevada, Utah, Idaho, Wyoming, California, Arizona, Colorado, New Mexico, Oregon and Montana.

We are not talking about Smokey the Bear land here, national parks, natural forests or military bases. It’s a miniscule amount (of the roughly 380,000 square miles of undesignated federal land in the Lower 48), around 1,000 square miles with enough land for about 5 million homes.

We think 3 million of those new homes could be built (on 400 square miles) near existing cities or within existing city boundaries.  We think that 600 square miles of additional land could be used to develop freedom cities, and freedom cities basically are entirely new cities. Think Columbia, Maryland, The Villages in Florida, Georgetown, Texas, and Sun City, Arizona.

It takes 40 years to develop one, so it’s a long-term process, but you have to start somewhere.  We’ve identified areas that would be ideal for 20 new freedom cities. You could have 2 million homes in those 20 cities, and they’d be about 30 square miles each.

What are some other options?

The second option is light touch density in Greenfield subdivisions. Think of a new subdivision that may have started 10 years ago, it may be starting today, but you’re selling houses, building and selling houses. Over time that’s called a Greenfield. There was nothing on that land before. It was used for farming or whatever it was before, and now it’s a Greenfield.

We’ve gone back and looked at the development of Greenfield subdivisions throughout the country. We’ve looked at the density and how much more housing could you build on the land with roughly the same infrastructure. You’ve already got sewer lines, water, all of those.  You just build to a somewhat higher density.

Option three is also light touch density, which I’ve already described, but now we’re talking about infill with teardown. We’ve looked at the feasibility of tearing down the existing structure and building light touch density (higher density developments) in its place.

Our fourth option is livable urban villages in the core areas. The core areas are areas that are currently zoned either commercial or mixed-use or other special use, but they don’t generally have housing on them. We are not talking about parks. We are talking about areas that have some market-based use on them but not residential. It has been done in a number of places around the country very successfully, but not enough.

The last option is light touch density without teardown.  Think of accessory dwelling units (where additional units, granny flats or backyard suites, are built on existing lots with homes on them), things like that.

So, you add all this up and you’re looking at 17 million to 20 million homes over 10 years. We’re not saying that you need to or want to build all 17 million to 20 million homes. The point is you could. Every locality might have one, two, three, or four, even five options that might apply. And if this doesn’t happen, it is shame on us.

You have been critical of federal policies intended to make homes more affordable for people, such as broadening access to government-guaranteed loans. How are your proposals that do involve some government intervention different?

It’s the private sector that’s going to decide. Is there enough demand to build this housing in this location? And if there is, then they are going to start a subdivision and build the housing. They’re going to be adding supply based on market demand, but they’re not going to be creating artificial demand through massive leverage.

Builders often produce large homes that many people can’t afford, however. So, how can they be incentivized to build smaller, less profitable housing for working families?

The builders are not the problem here. You have to look at the state and local governments who have policies that force builders to build large houses on lots of land and have policies that make the land expensive. They make land scarce. Scarcity means higher prices.

Any final thoughts?

Our view has always been, don’t just say what the bad is. These are five real solutions that can solve our housing problems. If only a quarter of this would happen over 10 years, we wouldn’t be talking about it.