“If our population isn’t increasing, why does Michigan need more housing?”

That’s a question I frequently hear when I work on housing policy, and it's a very understandable one. Here’s the answer.

The price of housing changes for the same reason that the price of anything else changes: supply and demand. The demand for housing has increased faster than its supply, so prices have shot up.

Why has the supply of housing not kept up with increased demand? Interest rates, which buyers notice, affect builders, too. Labor and material costs are also up, due to insufficient supply. And governments make it expensive to build. In some places, it’s illegal.

If Michigan’s population isn’t growing, why does demand for housing go up?

The number of people in a state does not determine the demand for housing. What matters is how many people want to buy a home.

Even if the state population hasn’t changed much, more people want to buy a home than in the past. Why is this?

• Our population is getting older. People are living longer and staying in their homes longer. An aging population needs more homes than a younger population. Consider a simple analogy: Three people live in a town: two 40-year-old parents and their 10-year-old daughter. How many homes do they need? One. Three people live in another town: two parents, both 60 years old, and their 30-year-old daughter. How many homes will they want? Two. Both towns have the same number of people, but one needs twice as much housing.

• Changing family sizes. Over the past 50 years, the average household declined from 3.3 persons to 2.5. So we need 25% more homes for the same number of people.

• Preferences and demand for housing vary over time and from place to place. Some areas of Michigan are growing, and some are shrinking. Even when the population stays the same, what people want in a home changes — including its size and location — as does whether they want to buy or rent. Not everyone wants to renovate an old home, adding to demand. In short, housing is constantly changing and never stagnant.

• More people want second properties. The number of people owning, or trying to own, second homes has increased. That will increase demand for homes even if the number of state residents doesn’t change.

Michigan’s lawmakers can’t do much about interest rates or the cost of building materials. Increasing the number of people who work in the housing industry takes a long time. But lawmakers can increase the housing supply by lessening state and local regulations that make it more expensive to build.

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