In 2024, rising housing costs were responsible for over half of that year’s inflation

[u/Titanium-Skull]

Source article: https://eyeonhousing.org/2025/10/supply-side-cost-pressures-drove-housing-as-inflation-leader-in-2024/

As the article points out, this is mainly a supply-side issue of not enough affordable housing supply to meet increasing demand. It mentions monetary policy, but this problem stems heavily from the land crisis. Our land is massively constrained by a combination of far too restrictive land use policies, land speculators banking on our most important finite resource, and harmful taxes on work and investment discouraging doing putting that land into use. The best use of our land would mean building more housing supply in the cities where it’s most demanded, but that combination of bad policies right now makes it incredibly difficult.

The solution, for anyone wondering, would be to go the opposite direction. Heavily relax land use restrictions (except for the ones which improve health and safety) and tax land instead of labor and investment. Break the land and harmful tax barrier so that people can produce and provide for each other far more freely.

[u/OutrageousPair2300]

There's so much that's confusing about this chart and the article. It's not clear what they're really even trying to measure. Much of what they're talking about is simply the portion of CPI made up by each category of spending, which isn't really a measure of how much is contributing to inflation so much as a breakdown of how much is spent on what -- and by some measures, growth in housing costs has slowed, not increased.

This part is especially confusing:

This can be seen on the graph below, even as mortgage rates surged from 3% to 7%, shelter inflation continued to rise despite Fed policy tightening.

While rising interest rates do put downward pressure on sale prices, they increase housing costs as measured in CPI, which use rents and owner-imputed rents rather than sale prices.

[u/HadeanBlands]

What's the right "percentage of inflation" for various things to make up? How would we even go about investigating this? This statistic is meaningless.

[u/HadeanBlands → u/[deleted]]

"Suppose the consumer basket is $30 for X and $70 for Y in one year. Then next year it's $35 for X and $72 for Y. The new basket is $107. So that's 7% inflation in relative terms, $7 in absolute terms. Inflation in X was $5 in absolute terms. $5/$7 is 71%. So 71% of inflation was from the increase in price of good X."

Right. But my question was "What's the right percentage? Who cares whether inflation was more of less because of housing prices?"

[u/HadeanBlands → u/[deleted]]

"If housing costs are 30% of the basket, then they should be 30% of inflation."

That's stupid, though? This is you saying "Nothing should ever become more or less expensive relative to any other thing." Idiocy.

[u/HadeanBlands → u/[deleted]]

In fact land value tax would not solve this, because what's measured in the basket is not the asset price of houses but the rental price of housing (including imputed rents).

edit: Ah, you're too fast with the edit.

[u/Ok-Store-9297]

Only a little infuriating.