Government Regulation And The Housing Market
The Washington Post has interesting article today about the almost complete lack of smaller-sized homes being bult for the Washington DC/Maryland/Virginia market.
There are several reasons that this is probably occurring. Land values are so high that it makes more sense for developers to build one large homes rather than two or three smaller homes. The result is a market where it is virtually impossible to find a single-family home for less than $ 500,000, and even townhomes are selling in the $ 400,000 price range. Consumer demand is also cited as a reason only larger homes are being built; homebuyers, so this argument goes, don’t want smaller homes, they want the 3,000, 4,000, and even 5,000 and more square foot homes being built all over the DC area today. There is one factor, though, that seems to me to have the biggest, and most distorting impact of all. Government regulation of land use.
Consider this quote from the article:
Architect Christian Lessard said he and the other developers of MetroWest, the 2,250-home project underway near the Vienna Metro station, would happily build a larger number of smaller homes, but community opposition limited the number of units they could build. To make back the cost of the land, he said, the builders designed the townhouses they were allowed to build to be as large and expensive as possible — about 2,500 square feet, a size that in similar developments sells for about $500,000.
Lessard acknowledged that the outcome was not ideal.
“We’re only designing for 20 percent of the population right now. That can’t last forever,” he said. “As a society, we’ll have a problem because eventually no one’s going to be able to afford this other stuff.”
Well, the problem is that government regulation of land use and house size is distorting the market place. If all the developers can build are larger homes, then thats all that people will be able to buy. And some people will be priced out of the market completely.
Even when people recognize the problem that the regulations are causing, though, the only solution they can seem to come up with is more regulation:
Local government planners say there is little they can do beyond measures in place, such as requiring builders to set aside some units as moderately priced. These policies produce only so many affordable units, and builders generally charge more for the market-rate units to make up the cost of building the set-asides
Fairfax planning director Fred Selden said the county is considering using incentives to ensure a mix of unit sizes in new condominium and apartment projects, but there are no plans to use cottage zoning or any other means to influence the size of townhouses or single-family homes. There’s no doubt, he said, that developers have an easier time getting approval for projects with fewer, larger townhouses because they produce less traffic and less competition for on-street parking, since bigger units come with more garage space
Here’s a radical idea. Stop telling developers what they can do with their property and let them build housing based on market demand rather than economic necessities created by your regulations. Maybe it just might work.