Reform Austin recently published a story chiding state officials for interfering to “delay, postpone or outright stop the construction” of affordable housing by local governments. The article goes on to claim that “cities all across the Lone Star State are using every tool in the toolbox to crack the housing problem.” Interestingly, the article makes no mention of the one “tool” cities have that they aren’t using: repealing land-use regulations.
Study after study has found that zoning and land-use regulations are the primary cause of high housing prices. Such controls and restrictions impose arbitrary costs on builders and developers, and those costs are passed on to home buyers in the form of higher housing prices.
As an example, in 2008, University of Washington professor Theo Eicher found that land-use regulations imposed by the city of Seattle and the state of Washington increased the cost of a home by $200,000! At that time, the median home price in Seattle was $450,000, which means that land-use regulations increased the cost of a home by 44 percent.
As another example, Richard N. Maier, an executive at home builder DR Horton, details the cost of regulations on one property in Austin, Texas. In his article, Maier lists the costs of five city regulations:
- Historic Preservation– $16,226
- Heritage Tree Ordinance– $2,742
- Impervious Cover– $79,800
- Storm Water Pollution Protection– $1,563
- The “McMansion” Ordinance– $12,500
The cost of these regulations came to $112,831! Maier notes that the average builder operates on a margin of 18 percent, which could bring the total cost of regulations to $137,598. This is the amount that the home price will be increased simply to pay for government regulations. At the time, Zillow reported that the median home price in Austin is $326,000. The cost of regulations on this one property represented more than 40 percent of the median home price.
It is not a coincidence that Austin has the least affordable housing in the state’s six largest cities. Austin has the most restrictive land-use regulations in the state. Reform Austin reports that the average individual must work 116 hours to afford a single bedroom apartment, versus 96 hours in Houston and only 72 hours in El Paso.
If local officials truly want to address the affordability of housing, then they would begin repealing the regulations that impose additional costs on builders.
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