But rental prices aren’t rising everywhere. In Tokyo, home prices have remained relatively stable for 25 years. What gives? With an estimated population of 38 million, the greater Tokyo area is the most populous metropolitan region in the world, larger than New York City and Los Angeles combined. Tokyo is a global financial center, home to 36 of the world’s largest companies, and a major hub for media, design and manufacturing. So why hasn’t the affordability crisis hit the Japanese capital?

One major reason, according to experts, is markets. With essentially no rent controls and very few restrictions on height and density, Tokyo is the rare modern city where supply can respond to demand in real time. In other words, it’s a free market. Prices rise and fall as the supply of new and available housing changes to meet the needs of residents.

Adjusted for population, Tokyo approves two “housing starts”—new residential construction projects—for every one in New York City. That’s why the average rent for a two-bedroom apartment in Tokyo was less than $1,000 per month as recently as 2018—less than half the cost of the same apartment in Seattle.

And in San Francisco, where strict housing regulations and misguided attempts at rent control have produced the highest housing costs of any major American city—nearly $4,000 for a typical one-bedroom apartment.

In 2015, after San Francisco's Board of Supervisors attempted to pass a “moratorium” blocking all new housing development in the popular Mission District, San Francisco City Supervisor Scott Wiener (now a California state senator) published an op-ed titled “Yes, Supply and Demand Apply to Housing, Even in San Francisco.”

Wiener declared, “We’ve never come close to producing enough housing to allow anyone to argue that increasing housing supply doesn’t stabilize housing prices. But, we do have evidence to the contrary. Since 2003, San Francisco has grown by nearly 100,000 people, while producing around 24,000 units of housing. During that same time period, housing prices have gone through the roof.”

Wiener concluded, “Economic principles aren’t always convenient, but they are real. Supply and demand exists, and it applies in San Francisco.”

One U.S. city that has succeeded at keeping rents relatively low, even as the local population has exploded, is Houston, Texas.

In the first decade of the 21st century, the greater Houston area grew by a staggering 20%, ballooning from 4.7 to 6 million residents, but during that same period rents actually decreased. So what’s the secret to Houston’s sustained affordability? Deregulation.

Houston is the only large city in America with no official zoning restrictions. The results can be eccentric: Adult video stores located next to corporate offices, modern churches wedged between warehouses, and residential buildings in a wide variety of shapes, colors, and styles. But at the end of the day, this laissez faire approach to housing has helped Houston remain one of the few American cities where Millennials can afford to buy first homes.

“Houston’s success,” wrote Harvard economist Edward Glaeser, “shows that a relatively deregulated free-market city, with a powerful urban growth machine, can do a much better job of taking care of middle-income Americans.”

In large cities, restrictions and regulations advertised as “protections” tend to insulate wealthy neighborhoods from low-income renters. Historically, these restrictions were overtly racist, the machinations of city councils and “experts” who wanted to exclude people of color, and other marginalized groups. Even when regulations are well-intentioned they often have the intended effect of making cheap housing illegal by banning tall buildings, small apartments, and anything eccentric or ugly.

The road to an affordability crisis is paved with regulations. If we want to bring rents down and create more opportunities for everyone, we need to follow Tokyo’s lead and unleash the power of markets.