In other words, backlogs grow during downturns because of market forces, then persist during good times because of government-imposed limitations on construction.
“It’s a chronic issue,” Mr. Khater said. “We have both a market failure and a government failure.”
Those failures are both on display in San Francisco, which has a decades-old housing shortage. When interest rates were low and demand was strong, developers desperately wanted to build, but had to spend years obtaining the necessary approvals and permits. Now that the market has turned, some of the projects that managed to survive that process are being called off because developers can no longer afford to build them.
Michael Covarrubias, chief executive of TMG Partners, is a developer of residential and commercial property in the Bay Area. Mr. Covarrubias said he had two projects he could legally start construction on, with about 800 condominiums between them. But they’re furloughed because of rising costs of materials and financing.
“Real estate at its core is a simple business,” Mr. Covarrubias said. “You have to get a return on your costs, and it’s harder and harder to make the math work.”
Around the country, the persistent shortage of housing has caused a number of legislators to revisit an old idea: Public housing. In California, Hawaii, Rhode Island, Maryland, and Colorado, legislators have either introduced or passed proposals to allow state and local governments to develop housing for a range of incomes.
“If government gets in the business of providing housing, we can be that countercyclical supply,” said Alex Lee, Democrat of San Jose and member of California’s State Assembly. 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 has vowed to continue pursuing government-built housing.