Regulation and the High Cost of Housing in California
During 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.
|Date of creation:||24 Apr 2006|
|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
References listed on IDEAS
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.
When requesting a correction, please mention this item's handle: RePEc:cdl:bphupl:qt3hh7s35m. See general 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.