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Housing prices in Massachusetts may be inflated not solely due to demand. A large proportion of the  increased  may have been caused by the regulations imposed by state and local governments. A study by Harvard University economist Edward L. Glaeser shows the effect of this excessive regulation.

Since 1980, three regions in Eastern Massachusetts have experienced 200 percent price growth, placing them in the top four regions nationwide for price growth. In the past, high real estate prices stimulated a boom in construction, but the current price explosion has brought no increase in the issuance of building permits. In the 1960s, there were 172,459 units permitted in the Boston metropolitan area; in the 1980s, 141,347. Despite the sharp rise in prices in the 1990s, only 84,105 units were permitted.
More worrisome perhaps, regulations appear to have exacerbated impacts on the environment. Local regulations favor the most expensive type of housing development (single-family homes on large lots); discourage compact development (townhouses, multifamily, small lot single-family homes, and accessory apartments); and hamstring developers’ ability to produce thoughtful designs that protect the environment. As the Massachusetts Audubon Society’s ”Losing Ground” report in 2003 points out, the few houses being built consume excessive amounts of land (40 acres per day).
Local regulations have brought multifamily development not constructed under Chapter 40B to a standstill. In the 1960s, single-family homes represented less than half of all housing permits. In the 1990s, this number shot up to 80 percent. Of the 187 sample communities analyzed in the paper, 10 prohibit multifamily development outright and nine others restrict it to occupants who are 55 years or older. Multifamily units may technically be allowed in the other 168 communities in Eastern and Central Massachusetts, yet the regulations are so restrictive that most multifamily development permitted in recent years has been through the state’s contentious 40B process, which allows developers to bypass local zoning requirements if they create affordable housing. via The Boston Globe.

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