Regulation and the High Cost of Housing in California
AbstractDuring the three-year period ending in July 2003, the rise in housing costs in California far exceeded the national inflation rate. Housing prices in five coastal counties increased by more than 60 percent. For the highest quintile of cities, prices increased by an average of more than thirty percent per year. Evidently California housing markets differ along important dimensions from those in the rest of the country. One striking difference is the degree of regulation governing land use and residential construction. California represents the most extreme example of autarky in land use regulations of any U.S. state. Cities are free to set their rules independently, with little oversight. Moreover, state tax policy creates incentives that are likely to decrease production an increase housing costs. Property taxes are constitutionally limited to one percent of acquisition costs while cities are permitted a share of local sales tax receipts. This creates a regulatory incentive to favor retail development over housing construction, to favor development of expensive housing over moderately priced housing, and to discourage the construction of housing. In this paper, we explore the linkages between land-use regulations, growth in the housing stock, and housing prices in California cities. First, we assess whether housing is more expensive in more regulated cities. Next, we assess whether growth in the housing stock over the period of a decade depends on the degree of land-use regulation at the start of the decade. Finally, we estimate the price elasticity of housing supply in regulated and relatively unregulated cities. Our results suggest that current regulations have powerful effects on housing outcomes.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Berkeley Program on Housing and Urban Policy in its series Berkeley Program on Housing and Urban Policy, Working Paper Series with number qt3hh7s35m.
Date of creation: 24 Apr 2006
Date of revision:
Contact details of provider:
Postal: F502 Haas, Berkeley CA 94720-1922
Phone: (510) 642-1922
Fax: (510) 642-5018
Web page: http://www.escholarship.org/repec/iber_bphup/
More information through EDIRC
house prices; Housing; Housing markets; Land-use policies; Social and Behavioral Sciences;
Other versions of this item:
- John M. Quigley & Steven Raphael, 2005. "Regulation and the High Cost of Housing in California," American Economic Review, American Economic Association, vol. 95(2), pages 323-328, May.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stephen Malpezzi, 1994. "Housing Prices, Externalities, and Regulation in U.S. Metropolitan Areas," Wisconsin-Madison CULER working papers 94-08, University of Wisconsin Center for Urban Land Economic Research.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).
If references are entirely missing, you can add them using this form.