Arnold Kling  

Randal O'Toole on Housing

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The book is American Nightmare, and it is iconoclastic. Some excerpts:


Glaeser and Avent each profess to oppose coercive policies aimed at forcing people to live in higher densities than they wish. Yet their often-erroneous arguments lend credence to those who do support such policies...Many of the city dwellers I've met think their lives are so ideal that they unhesitatingly support coercive government aimed at forcing everyone to live that way, but I've never met a suburban or exurban resident who wants to force their lifestyle on anyone else.

This suggests a sort of Tiebout equilibrium, in which people sort themselves into communities based on their preferences concerning land-use regulations. Unfortunately, the people who choose communities with lots of land-use regulations tend not to respect the preferences of the people who make other choices.

O'Toole argues that the benefits of population density are weak. It is the benefits of job density that are stronger.


land-use regulation was the single most important factor in the housing bubble of 2006.

What about bubbles outside the U.S.?

Due to strict land-use regulation in much of Europe, the 2006 American housing bubble that was supposedly caused by such uniquely American institutions as the Community Reinvestment Act and Fannie Mae was almost perfectly replicated in Britain as well as many other European countries.

I think that when it comes to trying to explain something like the housing bubble or the financial crisis, one should keep in mind James Manzi's term of "causal density." There were many factors at work, and any monocausal theory is difficult to defend. Therefore, in my view, it is inappropriate to speak of "the single most important factor."

Among the ten policy recommendations that conclude the book:


Increase down-payment requirements in states with growth-management laws.

The idea is that states that restrict new building will have more house price volatility, so that lenders should require buyers to hold more equity.



COMMENTS (5 to date)
Stuart Buck writes:

I've never met a suburban or exurban resident who wants to force their lifestyle on anyone else.

Then why do we have so much land-use regulation that essentially mandates suburbia (i.e., zoning requirements keeping business and residences apart, set-back requirements, parking lot minimum, etc.)?

Tracy W writes:

I've never met a suburban or exurban resident who wants to force their lifestyle on anyone else.

There's someone who is not a NZer. Inner-city living (ie sans garden) is regarded by at least some Kiwis who are in the habit of writing letters to the editor as immoral.

ThomasL writes:

Thomas Sowell's book, The Housing Boom and Bust, focused on land use regulation as well. It is an interesting theory, but the book was only OK.

Ghost of Christmas Past writes:
Stuart Buck writes:

"I've never met a suburban or exurban resident who wants to force their lifestyle on anyone else."

Then why do we have so much land-use regulation that essentially mandates suburbia (i.e., zoning requirements keeping business and residences apart, set-back requirements, parking lot minimum, etc.)?

A solid hit. But I feel much sympathy for O'Toole's perception: out here in the West at least, suburbanites think-- as Kling might put it-- more in terms of exit than voice. We think "you condo-and-trolley mavens can live in the old city, and we backyard-BBQ enthusiasts will live out here in the burbs. Live and let live." We actually have many choices of zoning regime among our various suburban cities. But the density advocates keep trying to outlaw suburbs and harass their citizens with "urban growth boundaries," "infill mandates," and stiff county-wide* taxes to fund useless corrupt downtown transit projects.

*We have big counties with many small cities, the reverse of NYC which has five county boroughs but only one city.

The "urban sprawl debate" is between two groups of people controllers. One group wants to fight congestion by reducing population in crowded areas and the other wants to fight sprawl by reducing population in uncrowded areas. Sometimes the two sides cooperate and pass BANANA (Build Almost Nothing Anywhere Near Anything) regulations. The resulting housing shortage is blamed on greedy landlords and used as a pretext for more regulations.

Can't both sides lose?

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