Does Smart Growth Lead to More Expensive Housing?

Wendell Cox believes so. In this article, he quantifies the effect of land use regulation on the cost of new home construction, which he says leads to

Looking at regulations in 11 metropolitan areas across the country, Cox found that smart growth guidelines account for more than 20% of new home costs, adding anywhere from $30,000 (Minneapolis-St. Paul) to $220,000 (San Diego). Furthermore, areas with the most restrictions are seeing faster increases to new home prices than those with more lenient regulations.

The result, Cox claims, is increased costs to developers and mortgage lenders and generally less affordable housing:

"More restrictive land use land use regulation also creates obstacles to people buying houses, requiring them to devote more money to housing than necessary and increases their vulnerability to losses in the event of a financial downturn."

Full Story: New Index Estimates New House Cost Impact of Land Regulation



Cox Assumes What He Wants To Prove

"Our first annual Demographia Residential Land & Regulation Cost Index estimates the price of land and regulation for new entry level houses compared to the historic norm in 11 metropolitan regions (Note 1). Metropolitan regions in which land and regulation costs remain at or below normal have an Index of 1.0 while those with land and regulation costs above normal will have an Index above 1.0 (Figure 1). More restrictive land use regulation is variously referred to as "smart growth," "growth management" and other terms."

In other words, his study proves that metropolitan regions whose land and regulation cost is above the historical norm have higher housing prices - as if you needed a study to prove something so obvious.

Then, without any evidence, he simply defines those regions as having "smart growth" policies.

In reality, smart growth involves less restrictive land-use policies in some places and more restrictive policies in other places. There is no reason to think that his index correlates with smart growth policies.

Charles Siegel

Yeah, so?

Yeah, smart growth can lead to more expensive housing. So what? At least it's REAL value, generated by a higher quality of life, easier commutes, more transit options, walkability and a more enriched cultural experience, unlike what the sprawling, low-density suburbs offer, with their artificially-inflated value, shady lending schemes, burst housing bubble, car-dependency, anonymity and class and racial segregation.

No one ever said that buying and owning a home was supposed to be easy or that you can treat it like an ATM machine before flipping it and moving on, like we saw people doing during the housing bubble. It's a sacrifice, and one that will pay off from steadily increasing, Smart Growth-driven value that you or your loved ones can benefit from when you retire or die. Better that than what foreclosure-riddled suburbia is treating its adherents to!

At the end of the day, do you want real value from your home and quality of life? Or do you want to risk losing everything to a home in the middle of nowhere that has suddenly lost its value?

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