The Exclusionary Effect of Growth Controls

Local government regulation of land development and homebuilding has become more complicated and more demanding in recent years. Most of the new control techniques can be used either to manage growth in an orderly way or to limit and discourage growth. A review of experience in Northern California reveals many instances in which techniques such as utility moratoria, development fees, growth quotas, environmental impact reviews, and environmental lawsuits have been used in ways that increase the cost of new housing. Among the direct cost impacts of growth controls, the most important result from the rapidly increasing development charges levied by many communities, and from the stretch-out of development time caused by local review procedures. Many growth controls also generate a series of indirect impacts likely to lead to far greater increases in the sales prices of new homes. Four indirect impacts likely to have major effects on house prices are redesign of housing developments to make them more acceptable to local interest groups; restriction of the supply of land available for homebuilding; restriction of competition among homebuilders; and reduction in the ability of homebuilders to increase their output during cyclical increases in consumer demand.