Map Reveals the Reason Your Rent Is So High
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Stop us if you've heard this before, but "the rent is too damn high."
However, unless you're a regular at your local zoning board meetings, you might be surprised by the reason: land regulation.
KOMUnews - flickr.com
Of course, supply and demand are largely at play in America's housing affordability crisis, but costs associated with land regulation — which involves the cost of the land itself and the land entitlement process — are preventing homebuilders from keeping up with increased demand for new and affordable housing, Business Insider reports.
Jeffrey Beall - flickr.com
ATTN: previously reported on how slowed wage growth and increased demand for affordable housing aren't being met with a proportional influx of affordable housing options for renters or homebuyers. But this multifaceted housing crisis is also being driven by high land regulation costs, which vary from state to state.
Here's a breakdown of the land regulation costs per state.
"Land entitlement represents one of the greatest bottlenecks for homebuilders, with timelines extended further following the Great Recession," Bank of America analyst John Lovallo II said in a recent memo to clients.
The cost of land is one factor, but things can get especially complex (and costly) for homebuilders when it comes to the land entitlement process.
Developers have to submit construction plans to local governments, possibly request zoning changes, and depending upon where the development is being built, request additional permits for mitigating environmental concerns.
"All in all, land costs make up 23 percent of the final cost of a home in Lovallo's estimation, and 8 percent of the total is simply from the entitlement process," Business Insider reports.
Even President Obama's Council of Economic Advisors have recognized land regulations as a prominent factor in housing affordability issues. In a 2016 report, the council wrote that "there is evidence that land-use regulation may also play a role in the presence of increased economic rents."
The report continues:
"Such regulation in the housing market can serve legitimate, welfare-enhancing purposes, such as restrictions that prohibit industrial activities from occurring alongside or within residential neighborhoods or limitations on the size of a dwelling due to a fragile local water supply. But when excessive and primarily geared toward protecting the interests of current landowners — including their property values — land use regulations decrease housing affordability and reduce nationwide productivity and growth."
[h/t Business Insider]
