Study: State Growth Management Acts Causing Housing Prices to Rise

Reason Public Policy Institute

A Reason Public Policy Institute study finds that statewide growth management laws in Florida and Washington are costing homebuyers thousands of dollars. The report shows that between 1995 and 2000, Washington's Growth Management Act added $5,064 ($844 annually) to the price of a typical home in the state.

"Smart Growth and Housing Affordability: Evidence from Statewide Planning Laws" demonstrates that Washington's Growth Management Act was accountable for 26 percent of the increase in the state's housing prices between 1995 and 2000. And the study reveals strikingly similar results in Florida. Between 1994 and 2000, growth management laws added $5,425 ($775 annually) to the price of a home in Florida and were responsible for 20 percent of the increase in the state's housing prices.

"The implementation of the Growth Management Act has resulted in higher prices and decreased housing affordability in Washington and Florida, thus making the goal of home ownership less attainable for renters and lower-income households," said Samuel Staley, co-author of the report. "The intentions were good, but there are serious, unintended consequences to these policies. Real estate markets are tricky and when policymakers try to forecast growth patterns they often end up limiting the supply of housing and unintentionally causing prices to soar."

The study illustrates that Washington's housing prices increased throughout the 1990s, but rose dramatically between 1995 and 2000 – the years in which the growth management law took effect. Counties that were not planning under the Growth Management Act experienced significantly lower rates of increase. Currently, 29 of the state's 39 counties are engaged in planning and development under the growth management law.

In Florida, there is also a direct relationship between housing-price growth and the length of time a county plan has been in place. On average, Florida's 33 metropolitan counties have been planning under the Growth Management Act for 8.3 years. Counties with more experience planning under the growth management laws are more likely to see higher housing prices.

"This data shows there is a fundamental contradiction in the state's growth management laws" Staley said. "The regulations explicitly include goals to promote housing diversity and affordability, but often require planning mandates that are likely to increase housing costs."

Samuel Staley, Ph.D., directs the Urban Futures Program at Reason Public Policy Institute. He is a former economics professor and recently wrote the book, Smarter Growth: Market-based Strategies for Land-use Planning in the 21st Century.