Where regulations for land use increase housing costs
But since it relates to housing costs, the unfortunate reality is that the federal government has few policy breathing at its disposal to tackle the issue directly. That is because most regulations that increase costs are managed at the local level.
Limited regulations for land use evoke images of aging coastal cities that have environmental or historical conservation problems that tend to hinder new development.
That is well founded as New York City, San Francisco, Los Angeles and Boston have some of the most restrictive destination and construction laws in the country. Although these are not the only things that increase house prices, these cities are nevertheless among the most expensive markets.
And only because a city is relatively cheap does not necessarily mean that it has no regulations on land use.
“Although it is clear that the more restrictive the regulations for land use, the less affordable houses are, it is remarkable that even slightly regulated communities impose significant restrictions on the development of homes,” Altos President Mike Simonsen in his research paper priceless by design.
Simonsen crossed the affordability of housing with limitations for land use to see if there was a recognizable trend. To measure affordability, he used the ratio at home prize income. To measure limitations for land use, he used the University of Pennsylvanias Wharton Land Use Regulation Index (Wrluri), which keeps track of a number of factors with regard to land use and distils them in a score.
The trend is pretty clear. San Francisco has by far the highest wrluri of the analyzed markets and the second lowest level of affordability. New York has the second highest Wrluri, but it is surprisingly more affordable than Seattle, Miami and Los Angeles in terms of price-income ratio.
On the other side of the spectrum, Houston has the lowest Wrlusi and is the most affordable large market. Dallas, Charlotte and Atlanta have low Wrluri scores and are also relatively affordable.
Austin is an interesting exception. Despite a lower wrluri than Atlanta and Minneapolis, it has a considerably higher price-income ratio.
