I lied. One more post on the housing bubble.
A couple of commenters here have suggested that tight land-use regulations in some central cities may have cushioned them against sharp price declines. They point out that the more loosely zoned exurbs, rather than the central cities, have been hit hardest.
I don't know that the exurbs have in fact been hit hardest, particularly when one considers absolute price declines rather than relative declines. The Case-Shiller index, unfortunately, does not distinguish between central cities and suburbs.
But even if it is true, so what? Stringent land-use regulations, particularly anti-density regulations, push new development out to the exurbs. Anti-density regulations in the suburbs, also an alleged hedge against the bubble, then push the exurbs farther and farther from the central city. This makes the exurbs more vulnerable to price declines for at least three reasons. First, a house 30 miles from a business center is less desirable than one only 15 miles away. Second, a house 30 miles from central city amenities is less desirable than one 15 miles away. And finally, homes in distant exurbs are more vulnerable to spikes in the price of gasoline. It stands to reason that when the bubble burst, these homes would be the first to take the hit.
It's true these exurbs had looser zoning. But zoning restrictions become increasingly irrelevant as one pushes out to the limits of a metropolitan area. As demand for housing tapers off, land becomes less scarce relative to demand, and zoning restrictions no longer artificially constrain the supply. I don't think that loose zoning in the exurbs bears the blame for the rapid price declines there.
Stringent zoning may have helped cushion central-city prices, but they imposed a steep, steep cost on the metropolitan area as a whole by making metropolitan-area prices more volatile. Central cities can't dodge responsibility merely by arguing that their regulations made them better off.
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