Restrictions On Development Explain Housing Prices

Zoning restrictions can help to explain why house prices continue to rise.

2 minute read

March 18, 2005, 1:00 PM PST

By Chris Steins @planetizen


"Government limits on the supply of new homes have ... also helped push up house prices-especially when inflationover a long period is considered.

...[H]ouses are no ordinary good: when demand for them rises, increasing the supply can be difficult. Not only do they take time to build: building them at all can be hard, owing to planning laws governing the use of land, the density of housing and theheights of buildings.

But that has changed drastically in recent decades in the most populatedparts of the country, such as the north-east coast and California, according to a new paper by Edward Glaeser and Raven Saks, of Harvard University, and Joseph Gyourko, of the University of Pennsylvania. They studied the housing markets ofmore than 300 American cities since 1950 and have pieced togetherevidence of regulation-induced inflation in many places.

...Billions are spentevery year on "affordable housing" schemes, either through grants or byrequiring a certain portion of newly built units to be sold or rented atbelow-market prices. This latter requirement is, in effect, yet another a tax on new building. A more effective and cheaper way to make housing more affordable, he reckons, is to loosen restrictions on new construction. It is inconsistent,surely, for a government to offer help with one hand, while holding backthe supply of housing with the other."

[Editor's note: This article is only available to subscribers, or for a fee. It is included on Planetizen because it is an important article, and some readers may be interested in purchasing the article.]

Thanks to The Practice of New Urbanism

Thursday, March 17, 2005 in The Economist

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