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August 4 2016

Policy Focus: How Urban Planning Drives Up Home Prices

Angela Logomasini

Why are housing costs so high, particularly in some urban areas? A big part of the problem stems from state and local urban planning and resulting regulations. These policies include everything from traditional zoning laws and so-called “smart growth” regulations to excessive taxes and development fees. Some of these programs bar new home construction, while others inhibit needed housing investment by making rentals and construction less profitable. Unfortunately, urban planning policies tend to benefit politically organized and powerful groups, particularly the relatively affluent, existing property owners, at the expense of lower-income families and individuals. 

Urban planners also push “affordable housing” policies that ironically contribute to high housing costs. For example, rent control and regulations requiring builders to set aside housing for low-income tenants discourages investment in new housing, raising prices for everyone but the lucky few who benefit from these programs. 

Data show that prices are highest in cities where such government regulations artificially limit supply. To make housing more affordable, policymakers should roll back these counterproductive regulations, by eliminating urban growth boundaries, excessive taxes and “fees” on development, height restrictions and minimum parking requirements, and by reversing zoning limitations that prevent builders, homeowners, and developers from meeting market demand for housing. A freer, more competitive housing market would lead to greater supply and diversity, giving people affordable options.



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