These counties "were the epicenter of a wave of foreclosures that have left leading banks teetering and magnified the nation's economic problems," the reporters write. "The foreclosures in these counties started a ripple effect that led to the collapse of the financial system."Notably, these metro areas are also known for high housing costs. "A few of the 35 counties leading the foreclosure boom are in already-distressed areas around Detroit and Cleveland," reports USA Today. "But most are clustered in places such as Southern California, Las Vegas, Phoenix, South Florida and Washington, where home values shot up dramatically in the first half of the decade, then began to crumble." What makes these metro areas particularly high cost? It's simply supply and demand. These counties were mostly areas where housing demand outstripped the ability to supply it fast enough to meet rising demand. The result was a market imbalance that drove housing prices well beyond the reach of the typical household. In Los Angeles, for example, housing supply lagged demand by nearly two to one during the early part of this decade. The median housing price climbed to nearly 10 times the median household income. The fall of the housing market was inevitable under these conditions, and, indeed, the bubble burst.
The fact housing imbalance and affordability issues were geographically concentrated begs a larger question for the planning community: To what extent did growth management laws contribute to this imbalance? Planning critics Wendell Cox and Randal O'Toole have made this point from the outset. At first their criticisms were easy to dismiss. The recession was national in scope, exotic financial instruments seemed to be the culprit, and the housing markets in the affordable industrial Midwest and Northeast also suffered severely. Geography didn't seem to play that big of a role.
The USA Today article, however, combined with data already compiled by Cox and O'Toole, and about three decades of academic research showing restrictive growth controls increase the price of housing, suggests this thesis is worth another look. Indeed, my quantitative analysis of the effect of statewide growth controls on housing affordability in Washington State and Florida (and recently updated for Florida), suggests that statewide growth management requirements alone might add up to 20% to the cost of housing. (That was enough to reverse trends toward affordability in Florida before the growth management act was implemented.)
The correlation is not perfect, but it's a lot closer than many in the planning profession may think and the strength of these relationships warrant a re-evaluation of the role growth management laws play in restricting housing supply and contributing to local and regional housing bubbles.