Chasing "Equality" Has Led to High Housing Costs
And What Inequality Really Means
Inequality has become a catch-all explanation for almost every difference in outcome in modern societies. Housing prices rise, tax burdens vary, neighborhoods develop unevenly—and all of it gets folded into a single word, as though every disparity must share a single cause. The prevailing conversation assumes that if numbers don’t line up neatly across groups or places, something must be wrong. Yet a growing body of research shows that much of what gets labeled inequality today reflects differences created by regulation, not by markets—and certainly not by human nature.
A major source of confusion comes from the way inequality is measured. Tools like the Gini Index, widely used by organizations such as the World Bank and the OECD, implicitly rely on a theoretical baseline of perfect equality—a world in which individuals have identical incomes, preferences, constraints, and life paths. The distance between real outcomes and that imagined baseline is then interpreted as evidence of injustice or malfunction. Yet economists from Vilfredo Pareto onward have noted that no free society has ever exhibited such uniformity. Empirical labor economics consistently shows that income dispersion emerges even in highly equal institutional contexts due to differences in skills acquisition, occupational choice, risk tolerance, household formation, and hours worked. Variation is inseparable from freedom, but inequality metrics do not distinguish between variation that emerges voluntarily and variation imposed by constraint.
The issue becomes far more serious when the disparities that produce genuine hardship arise not from voluntary differences, but from barriers imposed by law. In many countries, the largest contributor to harmful inequality is not the market—it is the fact that markets are not allowed to function.
Housing affordability provides one of the most rigorously documented examples. Research by economists Edward Glaeser, Joseph Gyourko, and Raven Saks has shown that in high-cost metropolitan areas in the United States, housing prices diverge sharply from construction costs, indicating artificial scarcity rather than natural demand pressure. Similar findings appear internationally: studies by the International Monetary Fund link zoning restrictions and permitting delays to housing shortages and rising inequality in cities such as London, Toronto, and Sydney.
These effects are not abstract. When height limits, density caps, minimum lot sizes, parking mandates, and discretionary approvals constrain supply, scarcity becomes policy. Scarcity raises prices. Those prices are then captured in inequality statistics, which present the result as a market failure rather than a regulatory artifact. The same pattern holds across advanced economies with tight urban land-use controls.
The development approval process compounds the problem. Empirical studies from the National Bureau of Economic Research show that permitting delays increase housing costs even before construction begins by raising financing risk and uncertainty. Developers respond predictably: they build fewer units, focus on higher-margin projects, or exit markets entirely. The resulting shortage is then attributed to speculative behavior or capitalism itself, despite being the direct outcome of administrative friction.
Property taxation reveals a parallel dynamic. Research on assessment systems in U.S. cities by the Lincoln Institute of Land Policy shows that effective tax rates often vary dramatically not because of market favoritism, but because assessments assume development potential that zoning rules explicitly prohibit. Parcels constrained to low-intensity use are taxed as though they could support higher-value development, while areas with permissive zoning capture value more efficiently. These discrepancies appear in inequality metrics, yet they originate in regulatory design rather than economic behavior.
The central mistake is treating every measured disparity as proof of injustice. Aggregate measures do not ask whether a disparity emerged from voluntary choice or legal constraint; they simply record a numerical gap and present it as a social problem. Yet some of the most severe hardships observed today stem from foreclosed options rather than unequal outcomes. When workers cannot live near employment centers because housing supply is legally constrained, that is not a natural inequality. When tax burdens rise because land is artificially limited in what it can become, that is not a market outcome. These are policy decisions with measurable distributional consequences.
What is required is a distinction between disparities that naturally arise in free systems and disparities that arise because governments restrict opportunity. Evidence from urban economics, public finance, and comparative international research shows that many of the most painful inequalities—housing scarcity, elevated living costs, uneven development—are not symptoms of unregulated markets. They are symptoms of tightly constrained ones.
The persistent error is assuming that any deviation from statistical uniformity constitutes a crisis requiring further regulation or redistribution. The deeper crisis is that many systems suppress the very mechanisms that would expand supply, reduce costs, and widen access. If societies want to reduce hardship in durable ways, they do not need to chase a mythical baseline of perfect equality. They need to dismantle the regulatory structures that manufacture artificial inequality in the first place.