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Why Housing Is Expensive

Jul 24


I previously posted about a growing antiplanning movement in Britain and a conference held on the impact of planning on housing prices. Someone sent me a PowerPoint show (7.2 MB) that was given at the conference that graphically demonstrates the problem with finding a place to build a home in England.

Click the image to see a larger picture.

The show is a bit large but worth the download. It was presented by Kate Moorcock Abley, who is affiliated with Audacity, one of the groups that put on the conference. Audacity’s director, James Heartfield, will be speaking at this November’s American Dream conference in San Jose.

Speaking of San Jose, I recently came across a 2002 study by California home builders about why housing is so expensive in Silicon Valley. I can’t find the study on line, but here are its findings.

The study compared the cost of a 2,200-square-foot, three-bedroom house in San Jose and Dallas. The biggest cost difference was the land: a 2,400-square-foot lot in San Jose cost $232,000, while a 7,000-square-foot lot in Dallas cost only $29,000.

The next-biggest difference was the cost of the permitting process. Due to the lengthy and expensive permitting process in San Jose (and the risk that permits might never be granted), home builders there needed $99,750 “profit” per home, while Dallas home builders were satisfied with $9,900 in profits.

Labor was also a big factor. High housing prices increase labor costs, so San Jose home builders paid $143,000 in labor costs for a three-bedroom home while Dallas home builders paid only $100,000.

Finally, impact fees were $29,000 per home in San Jose but only $5,000 per home in Dallas.

Those who say that urban-growth boundaries are not “the” cause of unaffordable housing are right. The problem is urban-growth boundaries plus an onerous permitting process plus impact fees plus other regulatory costs. It just so happens that places with growth boundaries usually have lots of other regulations as well.


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Reprinted from The Antiplanner