One thing a lot of YIMBYs get wrong is that you can't deregulate your way out of a housing crisis because of how new housing is financed. Builders depend on outside investors to finance new housing projects. These investors base their investment not only on the land value and potential rent they'd be able to collect when the housing is built, but also how much they'd be able to raise the rent after it's built. This means that when the rent in a given area isn't rising enough to make new housing an attractive investment, new housing will stop being built in that area.

A big factor in why housing was affordable for most of the 20th century was the Savings and Loan associations, a product of New Deal era banking regulation. S&Ls were the only financial institutions allowed to take deposits in most communities due to limits on bank branching. They had access to very cheap financing because of regulations prohibiting interest on checking accounts, and limiting interest rates on other types of deposits. They were also only allowed to lend money for local real estate projects. This meant that you had a captive market where local savings could fund local housing development. The system fell apart after Reagan era deregulation forced the S&Ls to compete with national institutions offering higher returns. The S&Ls were pressured into offering higher returns themselves by shifting from residential financing to more speculative commercial real estate projects. The result was the failure of many S&Ls, and the rest of them being absorbed into the larger banking system.

The S&L system meant that it was possible to finance housing ahead of demand, which caused a relative decline in housing costs. Between 1950 and 1980, rents in urban areas rose by about 30% less than the CPI as a whole. Meanwhile, in the last 10 years, rents in urban areas rose by about 30% more than the CPI. (see https://fred.stlouisfed.org/series/CUUR0000SEHA , https://fred.stlouisfed.org/series/CPIAUCSL ). Housing prices will always increase more than inflation as long as new housing development has to compete with all other types of investment.

The YIMBYs are right that blocking any given building from being built will push housing prices up higher in that area, so new development is overall good for housing prices. What they miss is that deregulation will never reduce housing prices back to what they previously were or lower because developers will never come in and build new housing in a market where rents are stagnant or decreasing.

Really? Deregulation will never do this? Care to wager before I provide examples to the contrary?