How Restrictive Zoning Creates Housing Bubbles?

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One of the questions that often arises is why some cities experience such huge price swings, or bubbles, while others tend to remain fairly constant. Edward L. Glaeser of the Rappaport Institute for Greater Boston at Harvard University has put out a new study that ties housing bubbles to restrictive zoning. Cities such as Atlanta are much more open to development and thus have lower price swings than cities that are restrictive like Boston.

If you are a real estate professional or investor it is well worth taking the time to read the extract as it probably can guide your decision making processes in the future.

Here are the four major points that Glaeser makes in summarizing why the housing bubble impacts the Boston area so greatly and the impact of these bubbles.

• First, limits on new construction are responsible for the declines in Massachusetts’s population reported in the recent Census estimates.
• Second, restricting housing supply leads to greater volatility in housing prices.
• Third, significant price increases associated with restricted supplies of housing subsequently appear to lead to declines in employment and income.
• Finally, high housing prices change an area’s demographic mix.

Click here to read the whole report.