Are Planners to Blame for the Mortgage Meltdown?

<p>Randal O'Toole believes that in the search for blame for the mortgage and credit crisis, an obvious candidate is being overlooked: city planners.</p>
February 29, 2008, 10am PST | Michael Dudley
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"Subprime mortgages were only a symptom of the real problem, which is unaffordable housing. But what made American housing unaffordable? University of Washington economist Theo Eicher knows the answer: land-use regulation. As reported in the Seattle Times, Eicher has just completed a study showing that land-use planning is adding hundreds of thousands of dollars to the cost of homes in many states.

Eicher's research confirms my recent Cato policy analysis, The Planning Tax, which shows that growth-management planning has made housing unaffordable in a dozen or so states, particularly Hawaii, California, Florida, Maryland, Oregon, Washington, and most of the New England states. Meanwhile, housing remains pretty affordable in most other states, including the fast-growing states of Georgia, North Carolina, and Texas, because land-use planners have not yet seized power in those states.

Research by Harvard economist Edward Glaeser has shown that land-use regulation not only drives up housing prices, it makes them more volatile too - more prone to crashes.

Sadly, planning advocates are trying to convince legislatures and city councils in most states that don't have growth-management planning to pass such legislation and write such plans. Those plans not only deny the American dream of homeownership to low- and moderate-income families, they put the U.S. economy increasingly at risk of a Japanese-style crash."

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Published on Sunday, February 17, 2008 in Cato @ Liberty
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