NCPA - National Center for Policy Analysis

Growth Restrictions Send Housing Prices Skyward

May 18, 2000

Home builders and real estate agents point to restrictive land-use laws as a major factor in driving up housing prices not only in California's Silicon Valley -- famed for its astronomical prices -- but in metro areas across the U.S.

The result is that many of America's middle class families are being priced out of the housing market.

  • In 20 of the 45 largest metro areas, the proportion of homes that a family earning a median income can afford dropped by at least 2.6 percentage points -- and as much as 9.3 percentage points -- in the last five years, according to building industry statistics.
  • In addition to San Jose, Calif., the heart of Silicon Valley, the squeeze is being felt in such cities as Seattle, Denver, Chicago, Minneapolis-St. Paul and Boston.
  • Experts say that land accounts for about 35 percent of the purchase price of homes and communities that now require fewer houses per acre are inflating home prices.
  • The restrictions mean that fewer houses are being built at a time when demand is soaring -- in many instances ensuring that prospective purchasers are forced into bidding wars to get the home they want.

In California, where the crunch is the most severe, the legislature is considering a bill that would let cities and counties order a report on the impact of anti-growth initiatives on land use and affordable housing. The report would then be made public prior to referenda requiring the preservation of more open space.

Source: Haya El Nasser, "When Growth Gets Limited, So Does Housing," USA Today, May 18, 2000.


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