Washington Post: It takes way too long to build new housing in expensive cities
By Emily Badger | July 21, 2016
Rising home prices are a signal to builders: As housing gets more expensive, it's time to create more of it. Then as new buildings rise, the competition for scarce housing falls. And that keeps prices and rents from going crazy.
This cycle works for the most part around Charlotte, or Atlanta, or Indianapolis. But it's clearly broken in high-cost coastal cities like San Francisco, New York or Boston.
The housing markets there, as economists say, aren't very elastic. New supply doesn't respond well to rising demand. And so, in metropolitan San Francisco, home prices have spiked about 275 percent over the last 20 years. In Boston, they're up nearly 150 percent.
What explains, though, the difference between these two sets of places? Land is obviously part of the problem. San Francisco and Boston, hemmed in by water, have only so much of it left to build on. But while some of the obstacles are natural — the Bay Area's got those hills, too — others are manmade.
Critics have long argued that we make it much harder to build in some places than others. We outlaw denser buildings with single-family zoning. We empower neighbors to block new housing. We leave projects in limbo for months at a time, as officials decide whether or not to approve them.
This last factor — building permit delays — turns out to be a significant one, according to an analysis by Trulia chief economist Ralph McLaughlin. New York, Boston and San Francisco all take much longer on average than Atlanta or Charlotte to grant building permits to developers. That means new housing takes much longer to create. Building it costs developers more. Less of it ultimately gets built. And what does get built doesn't respond very quickly to pressure in the market.
Read the full story in the Washington Post.