Developer Profit Seen as Key to Boosting Housing Supply and Affordability

Richmond, VA – In a recent social media post, urban infrastructure expert Andy Boenau articulated a direct link between developer profitability and increased housing affordability, challenging common perceptions about the role of profit in the housing market. Boenau's statement, shared on July 13, 2025, asserts that allowing developers to generate higher profits incentivizes greater construction, ultimately leading to a more abundant and affordable housing supply.

"But the greedy developer will make a profit." GOOD. Developers provide homes. The more they profit, the more homes they can build. The more homes they can build, the more affordable homes become. People across the economic spectrum win when developers are allowed to build," Boenau stated in his tweet.

This perspective highlights a supply-side economic argument, suggesting that market mechanisms, when unhindered, can naturally address housing shortages. Proponents of this view argue that robust profit margins encourage developers to undertake more projects, including those that might otherwise be deemed too risky or less lucrative. This increased activity in turn expands the overall housing stock.

However, the relationship between developer profit and housing affordability is a subject of ongoing debate among economists and urban planners. While increased supply is generally seen as crucial for moderating prices, some research indicates that developer behavior can be more complex. Studies have shown that developers may "landbank" – holding onto land for future gains – or prioritize higher-density, higher-profit projects, which doesn't always translate into a broader supply of affordable units. The responsiveness of housing supply to demand changes, known as elasticity, varies significantly by region and is often constrained by factors such as land availability and local regulations.

Regulations, often referred to as a "regulatory tax" or "zoning tax," can significantly impact the cost of housing production and the speed at which new homes come to market. These include stringent zoning laws, lengthy approval processes, and various fees, which can increase development costs and reduce the incentive to build, particularly for smaller, more affordable projects. Boenau himself has been a vocal advocate for less restrictive zoning, participating in discussions around refreshing zoning ordinances to address affordable housing challenges.

The United States currently faces a significant housing crisis, with millions of households spending over 30% of their income on housing. While there is broad consensus on the need for more housing, the most effective strategies for achieving this remain contentious. Boenau's argument underscores a market-driven approach, emphasizing that fostering a profitable environment for developers is a direct path to alleviating the housing crunch and benefiting a wide range of residents.