Anyone familiar with housing affordability in the Washington (DC-VA-MD-WV) metropolitan area is aware that prices have risen strongly relative to incomes in the last decade.
However, a recent Washington Post commentary by Roger K. Lewis both exaggerates the contribution of higher construction costs and misses the principal factor that has driven up the price of housing: more restrictive land-use regulations.
Lewis compares construction costs in the early 1970s to current costs and finds that they are approximately 6 times as high. However, when the R. S. Means construction cost index for locations in the metropolitan area are adjusted for inflation, the increase is more like 15% (1970 to 2007).
Lewis also indicates that construction costs have risen faster than the "relatively flat income curve." In contrast, Census Bureau data indicate that median household incomes in the Washington metropolitan area have increased more than 30% since the early 1970s, after adjustment for inflation. House construction costs are the flatter of the two, not incomes.
While Lewis' focus is affordable housing, costs in this low income sector are impacted by many of the same factors that drive overall housing affordability (overall house prices relative to incomes).
Lewis does not consider the huge cost increase in the non-construction costs of housing. In the Washington metropolitan area, we have estimated that the land and the regulatory costs for a new house have been driven to more than 5.5 times the level that would be expected in a normal regulatory environment (see the Demographia Residential Land & Regulation Cost Index). The problem is that the restrictive land-use policies, such as the Montgomery County agricultural reserve, similar regulations in other metropolitan area counties and the large lot building restrictions in Loudoun County have driven the price of land up substantially, and with it, the price of housing. We estimate that more restrictive land use regulations have driven the price of a new house up approximately $75,000.
Not surprisingly, Washington's Median Multiple (median house price divided by median household income) remains more than a third above the 3.0 historic norm, at 4.0, even after the burst of the housing bubble. So long as governments in the Washington, DC area continue to strictly ration land for development, higher than necessary costs will continue to plague both housing affordability and affordable housing.
Email this Blog entry
I have been waiting for
I have been waiting for someone to share these post. This has really made me think and I hope to read more. Thank you very much for writing such an interesting article on this topic. - toko sepatu online
Sudden hike can be a result
Sudden hike can be a result of development in the cities .. Lot of people migrate to the cities in search of job opportunities, employment, business etc .. Thus resulting in the sudden hike
http://www.leatherfads.com/leather-jacket.aspx
Construction cost!
It’s a true face that, construction cost has increased drastically present years. It’s almost 6 times higher when compared to that of 1970’s in Washington. I think that is the reason why more people are migrating to rural areas! read more here
This is exactly what I was
This is exactly what I was looking for. After examine a few of the blog posts on your web site now, and I really like your manner of blogging. I really impressed by reading this article.
clubmz reviews
Great stuff of your stuff,
Great stuff of your stuff, man. I’ve read your stuff before and you’re too awesome. I enjoy what you’ve got here, love what you’re saying and exactly how you say it. You create it entertaining but you just seem to ensure that is stays smart. I can’t wait to see more of your stuff. This is really a fantastic blog.
cell spyware
some good post
I didn't say it didn't, to be fair. I didn't say it didn't, to be fair. I was just disappointed to find so much stomach-meat on the nachos was all. - Hotel di Semarang
This post has helped me to
This post has helped me to have another perspective. I am researching this topic for a paper I am writing. Your article provided me great insight of my topic.
free cell phone spy software
The actors about the
The actors about the expensive housing is well presented and i think if all these reasons are available with the agencies they should do some possible efforts to make it cheaper for the people.
Regards,
Alaczen
Urban Growth Boundaries Guarantee Inflated Housing Costs
If your area has urban growth boundaries, you will have affordability problems. That is guaranteed. I don't know why people cannot accept that. People have to react to over reaching government regulation, and in ways that politicians don't want. They are told every time, it is ignored every time.
Urban Growth Boundaries are a clear overreach. Taking otherwise developable land out of the market creates shortages. When the market says that farm should be turned into a subdivision, it should become a subdivision. Governments do not understand markets (and have no ability of understanding them) and should be prevented from interfering with them. You end up making an area that should have $20,000 building lots and turning them into $75,000 ones for no good reason.
Plus in the US, UGB's are likely unconstitutional. Its basically government taking of private property without compensation. That farmer is prevented from profiting from developing his farm into something the market wants. There is no way for the government to pay for that loss because there is no way it could afford it.
Overreaching land regulations are the biggest threat to home ownership in most of the developed world. It is only getting worse. There are no reason for places like Australia to have expensive land, but it does. It is a huge country with plenty of open land but it is stuck with over regulation. There is plenty of land in the Washington DC area. They need to deregulate its development. It would also help if the federal government would move more of its operations out of the area into more affordable locations.
Tubal reversal financing
Although I can't believe the fact with all you staded, I must acknowledge I do really like your way of composing.
Tubal reversal financing