Land-use restrictions and planning policies like smart growth, rather than bankers, politicians and policy makers, were the engines of the housing boom and bust, says Wendell Cox, an Illinois-based consultant and adjunct scholar with the National Center for Policy Analysis, the Wall Street Journal reported.
In the paper, entitled “The Housing Crash and Smart Growth,” Cox writes: “Gross national house value increases and losses were overwhelmingly concentrated in metropolitan areas with more restrictive land-use regulations…Many metropolitan areas with these land-use restrictions were not able to respond to the increased demand for homeownership caused by the greater availability of mortgage credit. The inevitable result was higher prices.”
From the peak of the bubble in 2006 till the crash of 2008, 11 heavily regulated metropolitan markets accounted for 73 percent of aggregate home value losses, he writes.
Smart growth, the Journal said, is generally defined as land-use policies designed to promote mixed-use development to rein in suburban sprawl.
Patrick Phillips, CEO of the Urban Land Institute, accuses Cox of teasing out one aspect of the crash and making it out to be the primary driver.
“The primary driver of the housing bubble,” he said, “was the excess capital chasing real estate.” [WSJ]