March 17, 2022 - 9:01 pm
As it turns out, you can’t outdesign the laws of supply and demand. That’s the message for urban planners and their well-meaning “growth management” efforts that sought to limit urban sprawl but instead drove up home prices over the decades.
Home prices in Las Vegas and nationally are soaring. The median price of a previously owned single-family home here hit $450,000 in February. That was an all-time high and $15,000 over January, which was the previous record.
Despite soaring prices, there’s not much attention given to how the government limits housing supply. That’s a mistake, as Randal O’Toole explained recently at reason.com. Government planners regularly limit where a person can build a home. Restricting supply puts upward pressure on prices. Bureaucrats prefer euphemistic terms such as “growth management plan” or “urban growth boundary.”
For instance, in 1963, California allowed cities to limit growth outside their boundaries. In the following decade, many restricted growth outside their city lines. That limited the supply of land available for housing and other uses. Unsurprisingly, home prices soared.
In 1970, the ratio between California’s home prices and median family income was 2.2-to-1. In 1980, the ratio in many California cities was above 3-to-1 or even 4-to-1. Four decades of restrictions later, those numbers seem quaint. Its current ratio is around 10-to-1.
Clark County has experienced something similar — with a twist. Many of our problems stem from the federal government’s ownership of so much of the state’s land, as economist Thomas Sowell detailed his 2009 book, “The Housing Boom and Bust.”
Between 1980 and 2000, the population in Las Vegas nearly tripled, but “the median price of housing did not change” after adjusting for inflation. Then environmentalists objected to the government selling off land for development. “Land use restrictions were followed by rapidly rising housing prices in Las Vegas,” Mr. Sowell noted.
Those high prices are back with a vengeance after the market collapse a dozen years ago. Clark County’s current price-to-income ratio is around 7.5-to-1.
Once again, the federal government’s stranglehold on land is limiting supply. Local officials warn the county will be out of disposal land within a decade, absent federal action. Last year, Nevada’s senators sponsored a bill to release 42,000 acres of public land for new development. But some environmental groups are adamantly opposed to it, and the bill is languishing.
Don’t look to the government to fix high housing prices. Scrutinize government policy to find out why prices are so high in the first place.