Are Land Use Policies Really To Blame For The Mortgage Meltdown?

I will start out by agreeing that, yes, land use policies can weigh into the high price of housing. However, there seems to be many who want to blame land use policies for all of our housing woes. Read the following article, Urban Land-Use Controls and the Subprime Mortgage Crisis, from Northwestern University's Kellogg School of Management, to gain one concept. The author is of a clear belief that low density housing caused the current housing crisis. This is a rather specious argument when one considers much of the real world literature that is out there, and works from other real estate research groups.

First, there is this story from the Chicago Tribune, Dreams turn into a dump; Builder vanishes, leaving a community in disarray, here we have a case where a project of significant density, with rather reasonable prices has failed. The problems seem to be much more in dealing with the availability of money to lend than with land use density.

Second, the High Tide for Housing, from Texas A & M's Real Estate Center provides an interesting counterpoint to the Northwestern University paper. The Texas A & M paper points out a number of "causes" of the mortgage meltdown. The idea that housing is an investment rather than shelter, land speculation, strong second home demand, all drive up demand. Simply Google the concept of people offering to pay for homes at higher than the asking price, and one sees numerous news articles from the early 2000's of the phenomenon happening. In my previous post on the Florida Foreclosure Disaster, the article cited reference homes being flipped in a single day for exceedingly higher prices.

In the mid-cape area, many communities have 40% or more of their housing units owned as second homes, seasonal rentals or other investment properties. If all these second homes were available to the local employee, with no out of region or out of state influences, there would be little or no need for subsidized affordable homes.

The current housing crisis is far too severe to to oversimplify the answer. Those who would like to place the blame solely on land use policies are doing just that. Too many want to believe that a trickle down housing plan will meet all of our housing needs. Personally, I believe that the trickle down concept does not work. An increased housing supply will not simply equate to lower housing prices. In fact, an out-of-control housing boom has in the past, and once again, contributed to the current housing crisis.