2/16/2005

Excessive Regulations Driving up the cost of Housing?

The U.S. Dept. of Housing and Urban Development (HUD) has taken a look at housing costs, and released a report on excessive regulations which restrict available land for development which might otherwise be used. Impact fees, environmental regulations and "smart growth" may be misused to justify limiting affordable housing production. Obsolete building codes limit more cost-effective building materials, and HUD is now requiring a review on all proposed regulations to determine their impact on affordable housing before taking effect. See this article about HUD, and then go to here to read the Wall Street Journal's article on the median price for a condo exceeding the median price of a single-family home for the first time. Condos have begun to fuel their own market as they increase in number in more expensive and up-scale urban areas. In the meantime, the FDIC attempts to review housing booms, which may or may not be followed by a bust. U.S. Home Prices: Does Bust Always Follow Boom? reports that the recent growth in home prices surpasses any of the last 25 years. A boom is an increase of 30% in three years, and a bust is a 15% decrease in 5 years, according to the FDIC, driven down by economic shocks. The change in today's credit market is uncharted territory and differs from past history--an additional factor which challenges the crystal ball readers who attempt to predict the conclusion of this current economic cycle.

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