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Yes, Smart Growth Caused the Mortgage Meltdown

May 2


Wendell Cox, one of the Antiplanner’s faithful allies, argues in a new paper that “smart growth exacerbated the international financial crisis.” Of course, the Antiplanner has said this at least since last December (and The Best-Laid Plans predicts such an outcome), while some of the Antiplanner’s loyal opposition remains skeptical.

Skeptics probably won’t be persuaded by Cox, simply because his arguments are similar to those previously made here. “Excessive land-use regulation,” says Cox, led to artificial housing scarcities. This drove up prices and led people who would otherwise have been able to afford a mortgage at prime rates to turn to subprime loans. Of course, the loosening of the credit market contributed, but without smart growth, we would currently have a “subprime mortgage problem” rather than a full-blown international economic crisis.

Cox supports these points with data showing that housing prices went up the most in regions with growth-management planning, but faster than inflation in some regions without such planning. This is supported by independent estimates of overpriced housing (see appendix B): the most overpriced housing is in places like Oregon, Washington, California, and Florida, which have been practicing some form of smart growth or growth management since before 2000. In contrast, the least overpriced homes are in Texas, North Carolina, Louisiana, and other states and regions that have avoided such policies.


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Reprinted from The Antiplanner