Solving the housing crisis means building when no one is buying

In other words, arrears increase during downturns due to market forces, and then persist during good times due to government-imposed limitations on construction.

“It’s a chronic problem,” Mr. Khater said. “We have both market failure and government failure.”

Both of these failures are on display in San Francisco, which suffers from a decades-old housing shortage. When interest rates were low and demand was high, developers were desperate to build, but had to spend years getting the necessary approvals and permits. Now that the market has turned, some of the projects that managed to survive this process are being canceled because developers can no longer afford to build them.

Michael Covarrubias, managing director of TMG Partners, is a residential and commercial real estate developer in the Bay Area. Mr Covarrubias said he had two projects he could legally start construction on, with around 800 condominiums between them. But they are furloughed due to rising material and funding costs.

“Real estate is basically a simple business, Mr. Covarrubias said. “You need to get a return on your costs, and it’s getting harder and harder to make the math work.”

Across the country, the ongoing housing shortage has caused a number of lawmakers to revisit an old idea: social housing. In California, Hawaii, Rhode Island, Maryland and Colorado, lawmakers have introduced or passed proposals allowing state and local governments to develop housing for a range of incomes.

“If the government goes into housing supply, we can be that countercyclical supply,” said Alex Lee, Democrat of San Jose and California State Assemblyman. This year Mr. Lee introduced a measure that would have created a new state agency to build mixed-income housing across California. It failed in committee, but Mr Lee promised to continue to seek government-built housing.

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