In a comment to my post on real estate prices, Andrew asked if I had any backup for my statement that restrictions (environmental and otherwise) are increasing the costs of new homes. And there’s plenty available in the literature.
This study shows that for a new home in Vancouver, WA, about 18% of the home’s price is caused by regulations. This article talks about NIMBYism & Boston’s housing market. This paper describes regulatory barriers and housing prices. Finally, this paper looks at environmental regulations and urges more academic looks at this issue.
However, I don’t think you have to be an academic to come to the conclusion that NIMBY is impacting housing prices. Take Houston, TX. There is (famously) no zoning in Houston. Houston remains one of the most affordable cities in the United States. Contrast this with the Bay Area, where there’s a lack of land to build (it’s largely built out), numerous environmental regulations, strict zoning, and a large amount of land that can’t be built on (mountains, earthquake faults, etc.).
Thanks for the refs. It does seem that regulatory pressures do exist. But it seems that they would be responsible only for a fixed amount of the cost of building new housing. They certainly don’t seem to account for the double digit anual rise in prices.
Re: Houston vs. the Bay Area…
Duh! Houston is an armpit 😉
I’m not saying that regulatory pressures are the only cause of high California real estate prices; rather, they are a large contributory cause. The great climate, high population, and largely built-out metropolitan areas, not to mention basic economics and some speculation, are also impacting prices.
Well, there certainly is a lot read on the subject. The Economist just came out with a whole slew of articles on the subject.