Academic study of land-use regs increasing housing pricesAn academic study was recently released quantifying how much land-use restrictions increase the cost of housing in various cities. The researcher is based in Seattle, and this article from the Seattle Times focuses on that city:
I actually discovered the study and article via the Antiplanner blog, which has an extensive analysis here, including this note on Houston:
UW study: Rules add $200,000 to Seattle house price
An intriguing new analysis by a University of Washington economics professor argues that home prices have, perhaps inadvertently, been driven up $200,000 by good intentions.
Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase (90%!) was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.
But 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.
Building in Seattle can be very time-consuming compared with nearby cities, because of Seattle's neighborhood-based design-review process, says Linda Stalzer, project development director for the Dwelling Company, an Eastside homebuilder.
Design-review committees, composed of citizens interested in architecture and development, are located throughout Seattle; their job is to review commercial and multifamily housing designs before they're approved.
"Depending on how complicated your project is, it might take you three or four times to get through it," Stalzer says.
Add together all the various review and comment periods, and it can take 12 to 18 months to get to the point of applying for a building permit, she says.
On a 25-unit Capitol Hill town-house project now under way, Stalzer estimated the various fees (including consulting and mitigation costs, but not building permits or land prices) have totaled about $650,000....
"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."
It's good that these costs are finally being acknowledged and quantified as the City Council debates new development ordinances. Hopefully they will take them into account and weigh any additional regulations very, very carefully.
Eicher says that regulation has increased housing prices in every city he examined. The smallest increase is about $21,000. By comparison, the Antiplanner found that growth management has boosted housing prices in only a little more than a third of the urban areas in the U.S.
I have to wonder if, for some places, Eicher is relying too much on his regressions. His numbers say that regulation in Houston has boosted housing prices by $49,000. But the median home in the Houston urbanized area is worth only $122,000. Taking out the cost of regulation leaves only $73,000. (Unlike most urbanized areas, which are mostly suburbs, the Houston urbanized area is mostly Houston, so these numbers are comparable.) That seems pretty low, but maybe it makes sense.
Thanks to Brian for the link.
Update: Demographia's take on the study.