This story was originally published in Builder.

Myths block progress.

Myths by nature masquerade as reality. They contain a measure of truth, but their ground in what's actual, real, and factual shifts constantly. Because builders have to bet big money upfront on future returns, they seize on opportunity to escape risk wherever else they can in their businesses. They're especially prone to the allure of myths.

The myth in market-rate, private-sector housing, for instance, that demand for single-family for-sale homes and unmet need are one and the same.

Or that private enterprise capital investment has no business and no prospects trying to bend the curve of costs and pricing to find expanded opportunity among those who need more available home and community options, beyond the present rings and constraints of demand. Or that profitably building houses buyers can afford is synonymous with building housing that's affordable.

Or the myth that regulatory barriers, fees, and building codes--albeit they're calculated to add upwards of 30% to new home costs--thwart builders, developers, and investors, and their partners from opportunity to meet housing's exploding need, which is for more homes for more people in more places.

We, in the media, contribute to myth. It happened this past week, with this story.

Yes, Japan, with 127 million people and 53 million households, has delivered nearly 1 million new homes and apartments a year for the past decade. That's less than half the U.S. population, and about half the number of American households, and yet the U.S. clocked in at 1.25 million starts last year.

Yes, prices on homes and apartments in Japan and Tokyo have been stable for that whole time, with Tokyo's prices indexing just about flat for the past 20 years.

And yes regulation--or the absence of over-regulation, excessive fees, etc.--plays a role, supportive of rather than hostile to residential development, as Wall Street Journal staffer River Davis reports.

Japan’s current level of housing supply is tied to a package of policy changes—implemented around the turn of the century—that were aimed at restoring the profitability of Japan’s land-development industry, according to Andre Sorensen, a professor of urban geography and a Japan housing expert at the University of Toronto Scarborough.

The Japanese government began relaxing regulations that had restricted supply, allowing taller and denser buildings in Japan’s capital. Private consultants were given permission to issue building permits to speed up construction.

“This created something like a free-trade zone in Tokyo,” Mr. Sorensen said.

Unfortunately for other countries wrangling with housing affordability crises, the Japanese formula is not easily exportable. Many of the cities where demand for housing is the stiffest—New York, London, San Francisco and Stockholm, for example—impose strict rules on land use and new construction, partly due to local political pressure.

But in Japan, the responsibility of regulating urban space largely shifted to the central government in 2002 under the Urban Renaissance policy. Mr. Sorensen said it had held at bay the “not in my backyard” movements that often inhibit housing construction in the U.S. through their influence over local governments.

This ignites the myth that blocks progress.

They took down the rules. Freed builders and developers of encumbrances, and welcomed growth, and look what happens. Development and building keeps pace with population and household growth, and prices remain stable.

We're perfectly ready to point the finger at the regulatory fee and code factor in pricing and supply constraint and call them the culprits of our housing shortage of homes, available and accessible to more of our population. To blame political will for a lack of productivity progress is a cop-out.

Chris Edwards, director of tax policy studies at the Cato Institute the and editor of writes:

"If the government gets out of the way, businesses can invest, supply will increase, and prices will be restrained.

"Not only will supply increase, but Kusisto and Grant report that businesses in deregulated markets respond to the high-price problem by innovating to cut construction costs. Thus, the private sector is not 'falling short' in places where it is allowed to work its magic."

This is not an argument that the private sector should not be allowed to work its magic.

The myth is that the private sector can not work its magic unless a regulatory strangle-hold loosens and enables the private sector to innovate.

Innovation works the other way around; it bursts constraint. Japanese home builders dealt with labor shortages, materials supply expense pressure, environmental and seismic challenges, and health and well-being issues of an aging population--and accelerated investments in technology-aided building systems that speed production, improve precision, and result in the most durable, high-performing, sustainable, and comfortable homes built anywhere in the world. And they do it in ways that drive costs out of the value chain, sharing a greater amount of that value with owners.

There's no chicken and egg. To get the kind of results in housing production, pricing stability, and development that Japan gets, three engines must fire--with agency and urgency.

  • Builders need to innovate to become more productive, build better, build more sustainably, and at a higher level of performance per dollar per square foot.
  • Regulators, municipal officials, utility companies, and building inspectors need to have skin in the game of making decent homes available to more of local populations, both currently residing in the communities, and those seeking to migrate in as essential workers.
  • Financial capital investors need to continue developing new structures, terms, and vehicles to expand availability of housing options to citizens, rather than to allow them to become more and more scarce and, therefore, higher and higher priced.

Now that there's a little bit of renewed pep in builders' step, it's really time for a little myth-busting.

This story was originally published in Builder.