July 03, 2005
Housing prices and population growth
Mickey Kaus quotes Steve Smith and poses a puzzle:
Smith:
Every state (and the District of Columbia) that voted for John Kerry last year, without exception, was among the top 24 states in the country in terms of the increase in residential property values since 1980.
Kaus:
Do Democrats produce rising home values or do rising home values make people Democrats? (The latter seems implausible.) Are both phenomena related to high education levels and/or a large concentration of universities? And how does this correlation jibe with the much advertised GOP dominance in the fastest-growing states, which you'd think would be states with rapidly appreciating real estate? Explain it away if you can, Michael Barone!
Kaus assumes that population movements drive housing prices, with prices rising most rapidly where people want to move. That would be true if the supply of housing were more or less fixed, as it is in the bubbly places such as Manhattan, San Francisco, and the West Side of LA. But where land for development isn't scarce, and isn't made scarce by land use regulations, the housing stock can expand to meet new demand without forcing prices up.
Since people move largely to find jobs, and since companies can generally hire cheaper labor where there's cheaper housing, it's not surprising that many low-housing-price areas are also fast-growing areas; they're fast-growing because their low housing prices (and other costs) attact jobs. (Retirees, too, move in search of low housing costs.)
That wouldn't be a bad thing if low costs for business didn't often mean weak environmental protection, tax systems rigged toward business, laws hostile to labor unions, and lousy public services, as well as low housing prices. But good or bad, it's not really puzzling.
