The unexpected outcome of town and country planning.

Synthesis:

  • The sudden rise in real estate prices in the United States of America (a real estate bubble) was one of the direct reasons of the outbreak of the global financial crisis. Nevertheless, contrary to common belief, this phenomenon was not present all over the country.
  • From 1998 to 2006, the real estate prices increased by 80 % on average. What is more, in some regions of the country like New York, Los Angeles or San Francisco, they even doubled. Starting from 2000, the prices significantly increased in 16 of the USA states (inhabited by 45 % of the population), and in all these states some regulations on spatial development were enacted. The bubble was not observed at all in 29 of the USA states (inhabited by 54 % of the population) and measures concerning this matter were taken only in a few of them.
  • The decrease in real estate prices was not the same across the country. In the metropolitan areas which had the biggest number of regulations, an average decrease of $97.000 per one house was noted. In the areas where town and country planning was less regulated, the decrease amounted only to $12.000 per house on average.
  • There is a strong correlation between the level of spatial development regulation and the real estate price. Research has shown that the restrictions in real estate supply, result in higher real estate prices, higher inflation and lower number of new investments.
  • There exists the infallible evidence that the excessive spatial development regulation results in the inflation of real estate prices. In spite of that, this issue has not received enough attention in the public debate in the USA. The only response of the local authorities was introducing more regulations.

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