Public debate falls into two schools of thought as to why housing costs are so high in many parts of the U.S. The YIMBY (“Yes In My Backyard”) school argues that housing is expensive because local governments—and voters—have adopted overly restrictive land use regulations that limit the construction of new housing. On the other hand, left-leaning politicians like Bernie Sanders contend that housing is expensive because “corrupt real estate developers are gentrifying neighborhoods.”

So, which is it? Are government regulations making it impossible to build new homes, or are developers price gouging homebuyers and renters? Who really pockets the profits from building—or not building—new housing?

In this piece, I lay out some basic facts about the financial ecosystem of housing development, and discuss the ways land use regulations affect development decisions. How do regulatory barriers impact the profitability of a new housing development? And how are the costs of development (including complying with regulations) shared among developers, lenders, and investors?

Read the full article about high housing costs in parts of the United States by Jenny Schuetz at Brookings.