Why Have Housing Prices Gone Up?

Since 1950, housing prices have risen regularly by almost two percent per year. Between 1950 and 1970, this increase reflects rising housing quality and construction costs. Since1970, this increase reflects the increasing difficulty of obtaining regulatory approval forbuilding new homes. In this paper, we present a simple model of regulatory approval thatsuggests a number of explanations for this change including changing judicial tastes,decreasing ability to bribe regulators, rising incomes and greater tastes for amenities, andimprovements in the ability of homeowners to organize and influence local decisions.Our preliminary evidence suggests that there was a significant increase in the ability oflocal residents to block new projects and a change of cities from urban growth machinesto homeowners’ cooperatives.