ruminations about architecture and design

Wednesday, January 29, 2014

the zoning bubble

I am dimly aware that my knowledge of economics would fit comfortably inside a thimble, but I can't help but comment on the connection between strict zoning regulations and sustained property bubbles. The Boston metro region has inflated home prices and rents due to the challenges involved with building new stuff just about anywhere. Texas does not appear to have a housing shortage, or excessive median home prices or rents. Parts of Great Britain have inflated house prices and strict NIMBY regulations on new development in urban greenbelt areas.

Okay, so there is a pattern, and many astute economists have pointed to this. My question has to do with duration more than causal relationships. Boston house prices will stay high for a long time because of zoning. A severe downturn in several key industries would create pressures that would depopulate the state and result in a housing surplus and subsequent crashes in valuations. Specifically, bio-tech, education, military equipment, finance, and technology would have to spiral into the toilet. Zoning regulations have no sunset, and few communities welcome relaxations of their laws. So, even a long depression in all those service sectors would take a while to overcome people's perception of housing value. Rents would fall first.

How long can a price bubble be sustained by the collective fiat of myriad building regulations?

No comments:

Post a Comment