Government's Role in the Housing Problem

by: Mark J. Perry

Click to enlarge

Thomas Sowell on the subprime credit crisis:

The government has brought on the housing problem, partly by highly restrictive building policies, which have caused housing prices to skyrocket artificially.

From today's Seattle Times, confirmation of Sowell's point:

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 was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.

Bottom Line: Of the $226,800 increase in Seattle house prices from 1989 and 2006, $200,000, or 88%, of the increase was the result of land-use regulation (see chart above, click to enlarge).

(Hat tip: Cafe Hayek)