Regulation and Runaway Housing Costs

An interesting article on the effects of regulation on housing costs, to the upside.

"In a nationwide study, it can be shown that Seattle is one of the most regulated cities and a city whose housing prices are profoundly influenced by regulations," [Theo Eicher, author of the study] says.

And later,

"The state is intervening to restrict supply. It's not that there's no land at all," Eicher says.

Supply and demand being what they are, prices react accordingly. If regulations restrict the available land to build residences on, or if the types of residential building is regulated, prices on existing houses predictably rise.

Eicher argues that "demand does not need to drive up housing prices."

Cities such as Houston and Atlanta, which have few growth restrictions, have shown that. They've been able to add enough housing to meet demand, so their home prices have risen more moderately than heavily regulated San Francisco and Boston, which have a harder time increasing housing.

In other words, Houston and Atlanta have fewer zoning restrictions and at the cost of government-regulated development. An important point Eicher makes is housing regulation is often the expression of the people living in the area. Says Eicher,

"My sense is land-use restrictions are imposed to generate socially desirable outcomes. We all love parks and green spaces. But we must also be informed about the costs. It's very easy to vote for a park if you think the cost is free."

Regulation is good if you're already a homeowner and you wish to keep your neighborhood the way you want it to be, but it's bad if you're a prospective buyer. Affordability and regulation oft are at odds with one another.

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