Capital Commerce

Cato Institute scholar Randal O'Toole has a new paper with the provocative title, "How Urban Planners Caused The Housing Bubble." The paper sets out to explain a quandary: California and Florida, on the one hand, and Georgia and Texas, on the other, each experienced massive run-ups in prices as the housing bubble inflated. But when the market tanked, the crash wasn't felt nearly as hard in Georgia and Texas, but obviously California and Florida have become notorious. This is strange—especially when you consider that many cities in Georgia and Texas are some of the country's fastest-growing.

O'Toole's explanation for the difference is that California and Florida had strict land regulations that curtailed growth, while Georgia and Texas had mostly laissez-faire land policies. Focusing on two cities—San Francisco, with its notoriously expensive housing, and Houston, notoriously cheap—O'Toole explains the connection between regulations and large swings in prices. It all has to do with how inflexible the housing market is in San Francisco, relative to Houston:

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