The Quantity Gap

The global housing deficit widened from 201 million units in 2010 to 269 million in 2023, through the cheapest sustained credit conditions on record. This is the quantity evidence QR-02 said would settle the question, and it settles it.

The evidence QR-02 identified as decisive

In July 2025 we argued that the price data could not identify what had gone wrong in housing, and that the argument would only be settled by a consistent international quantity series measured on a common definition across a wide sample. We said that if such a series showed the deficit narrowing across the cheap-credit decade, we were wrong.

That series now exists.

The global housing shortage rose from 201 million units in 2010 to 269 million in 2023. That is 68 million additional units of shortfall, an increase of 34 percent in the deficit, across the thirteen years containing the cheapest sustained credit conditions in recorded history.

A deficit that widens by 68 million units during a decade of near-zero real rates has told you which side of the market is binding.

We regard this as decisive for the question as posed. It does not mean credit conditions are irrelevant to house prices; they plainly are relevant. It means they are not what is producing the shortage.

The price series, for completeness

The same source gives price-to-income ratios across more than 180 economies, and the dispersion is extraordinary: from 3.0 in Saudi Arabia and the UAE to 86.7 in Syria, with Sri Lanka at 40.8 and China at 34.6. Several European economies sit well above the United States, which ranks seventh lowest in the full dataset at 4.5. Portugal is at 12.6, France 11.8, Luxembourg 11.5 and Germany 10.7. Canada is at 9.4 and the United Kingdom 8.3.

Two cautions apply and both are important. National medians average over metropolitan markets with very different dynamics, so the US figure says nothing about San Jose. And definitional treatment of informal and self-built housing varies enormously, which is most of why the top of the distribution looks the way it does. Use this ranking for ordering, not for pricing the gap between countries.

Supply-side developments

OECD public capital investment in housing fell from 0.17 percent of GDP in 2001 to 0.06 percent in 2018, a decline of roughly two thirds. Since the 1980s many high-income countries reduced direct public investment through right-to-buy schemes, the downsizing of public housing and a shift toward market-based subsidies. The delivery channel that historically served the affordable end was withdrawn, and the market channel that replaced it is least profitable precisely there.

The OECD's own 2026 work identifies a consistent set of constraints across member countries: rising construction costs, labour shortages in construction, higher borrowing costs for developers, restrictive land use policy, limited buildable land in high-demand areas, the effect of short-term rentals in some markets, and declining public investment. Simultaneously, household formation has shifted toward smaller and more numerous households, raising unit demand at a given population.

Only one item on that list, developer borrowing cost, responds directly to monetary policy. That is the finding QR-02 predicted and this data supports.

Transmission into rents

In around two thirds of OECD countries, social rental housing is under 5 percent of total stock. Only the Netherlands, Austria and Denmark hold a share the OECD treats as a meaningful buffer. Where there is no buffer, households priced out of ownership move into the private rental market, and the shortage appears as rent inflation rather than as a visible queue.

Programmes intended to serve low-income groups have often been prevented from doing so by weak targeting and affordability constraints, which is a separate failure from the quantity failure and compounds it.

Land as the underlying constraint

Access to buildable, serviced land sits beneath most of the other constraints. Where cities fail to expand serviced areas in line with demand, or apply restrictive planning rules, land scarcity pushes development outward and reinforces sprawl. Over the past five decades urban land area has expanded faster than urban population, particularly in Africa and Asia, reflecting increasingly land-intensive development.

More land per person alongside insufficient serviced land where people actually want to live is the signature of a planning and infrastructure failure rather than a physical scarcity.

What follows

1. Do not forecast affordability improving as rates fall. Easier credit into a constrained stock raises prices. This is now supported by quantity evidence, not just by inference.
2. Construction cost and serviced land are the binding inputs. Financing is second order against them.
3. Rent indices lead, house price indices lag. With a thin social sector the rental market absorbs the entire residual.
4. Public capital allocation is the policy variable with the clearest historical relationship to delivery at the affordable end. It is also the one that moved most, and in the wrong direction.

QR-02's central claim held. We would now state it more strongly than we did in July 2025.

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