Economist.com: Sheltered market

This week's Economics focus from the Economist magazine is an article, Sheltered market, argues that "restrictions on building can help explain why house prices are so dear." The conclusion of the article is not to require more affordable house, but to loosen zoning laws.

One lesson for rich-country governments, says Mr Glaeser, lies in the way that they help people who cannot afford adequate shelter. Billions are spent every year on affordable housing schemes, either through grants or by requiring a certain portion of newly built units to be sold or rented at below-market prices. This latter requirement is, in effect, yet another a tax on new building. A more effective and cheaper way to make housing more affordable, he reckons, is to loosen restrictions on new construction. It is inconsistent, surely, for a government to offer help with one hand, while holding back the supply of housing with the other.

The article's sources:

• Why Have Housing Prices Gone Up? Forthcoming in the American Economic Review


• Why is Manhattan So Expensive? Regulation and the Rise in House Prices?. Forthcoming in the Journal of Law and Economics