Yes, Red Tape and Fees Do Raise the Price of Housing

July 24, 2017

Few public policy issues can match urban housing politics for its incendiary combination of passion and misconception. To wit: the confounding idea that relaxing regulations and fees to decrease the cost of homebuilding won’t make homes more affordable.

Why? Because, goes the refrain, developers charge as much as the “market will bear” anyway. Any savings from streamlined regulations or reduced fees just yield more profit for the developer, not lower prices or rents.

That reasoning may sound legitimate, but it’s bogus. It misses the forest for the trees—or,  the city for the building. Across an entire metropolis, when homebuilding is cheaper, homebuilding speeds up. And in booming, housing-short cities such as Seattle, the more new homes built, the less prices rise—that is, the lower the price the market will bear.