Economists Point at Restrictions on Development as Cause of Housing Price Increases

Man-Made Restrictions Push Housing Prices Up

Economists are now saying that the political and regulatory processes of smart growth, slow growth and no growth movements have been a major contributor to housing shortages and thus the run-up of housing prices.

The remarkable run of record housing sales and prices since 1998 has become a major puzzle and topic among economists. The high prices have put homeownership out of reach for many young people and low-income households hoping to break into the market.

Economists increasingly are concluding that the shortage of affordable housing in Washington and other major U.S. cities on the East and West coasts is a result more of man-made restrictions on development than high construction costs or other market forces.

'It simply takes too long and is too expensive to move through the development process,' said Mark Vitner, senior economist at Wachovia Securities, pointing at 'smart growth, slow growth and no growth' movements in many of the same areas where the population and demand for housing are growing the fastest.

What many economists have been proclaiming as a 'bubble' in Washington and other high-cost areas can be mostly explained by the restrictions on development, combined with a rush to homeownership by renters taking advantage of low interest rates, he said.

The restrictions have mounted as homeowners have grown more powerful and more willing to use their power to stop or greatly restrict development in their neighborhoods through the political and regulatory processes and the courts, according to a study published recently by the National Bureau of Economic Research.

See the full RisMedia article here.

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Linda Slocum
HoneyStartPacking.com
Santa Clarita Real Estate