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33 Fla. St. U. L. Rev. 471 (2005-2006)
The Economics of Inclusionary Zoning Reclaimed: How Effective Are Price Controls

handle is hein.journals/flsulr33 and id is 485 raw text is: THE ECONOMICS OF INCLUSIONARY ZONING RECLAIMED: HOW EFFECTIVE ARE PRICE CONTROLS? BENJAMIN POWELL* & EDWARD STRINGHAM** I. INTRODUCTION .................................................................................................. 471 II. WHERE INCLUSIONARY ZONING IS PRACTICED AND WHAT IT HAS PRODUCED.. 474 III. ECONOMICS OF INCLUSIONARY ZONING ............................................................ 477 IV. ERRORS IN THE DEBATE OF INCLUSIONARY ZONING .......................................... 482 A Do Builders Absorb the Cost of Inclusionary Zoning as a Cost of Doing B usiness? .................................................................................................... 48 3 B. Does Inclusionary Zoning Offer Developers Benefits That Offset Its Costs?. 485 C. Are Price Controls a Good Way to Correct for Problems Created by Exclusionary Zoning? ................................................................................. 489 D. Is Government Intervention Needed to Prevent High Housing Costs? ....... 493 E. Is the Construction of Market-Rate Housing Harmful to Low-Income H ouseholds? ............................................................................................... 495 V . CONCLUSION ..................................................................................................... 499 I. INTRODUCTION Many areas of the United States are facing a housing affordability crisis, and the problem only seems to be getting worse. A family with average earnings cannot afford the median priced home in any of the thirty least affordable housing markets,' and prices in the most expensive markets continue to rise. Between 1995 and 2002, median home prices rose by 65% in the San Francisco Bay Area, 62% in Boston, 54% in San Diego, and 49% in Denver.2 The areas with the worst affordability problems are typically clustered on the East and * Assistant Professor of Economics, San Jose State University, and Director of the Center on Entrepreneurial Innovation at the Independent Institute. Ph.D., Economics, George Mason University, 2003. ** Assistant Professor of Economics, San Jose State University. Ph.D., Economics, George Mason University, 2002. The authors have benefited from discussions with Paul Campos, Jack Estill, Roger Folsom, Tom Means, Mike Pogodzinski, Phil Rafton, Todd Zywicki, and participants of inclusionary zoning panels where we have presented, including the California Department of Housing and Community Development, Sacramento, California (Nov. 3, 2004); the California Housing Consortium Public Policy Forum, Long Beach, California (Sept. 28, 2004); the Annual Ventura County Housing Conference, Simi Valley, California (Sept. 15, 2004); the Plan for the People, Monterey, California (June 25, 2004); the Pacific Coast Builders Conference, San Francisco, California (June 17, 2004); the Building Industry of Southern California Annual Meetings, Riverside, California (June 10, 2004); the Sonoma County Alliance, Santa Rosa, California (June 2, 2004); and the California Building Industry Association Annual Meetings, Sacramento, California (Apr. 15, 2004). Daocheng Zhu, Ilkay Pulan, and David Skarbek provided excellent research assistance. We also thank San Jose State University for research support. 1. Ruth Simon, The Nation's Least-Affordable Housing Markets, WALL ST. J., Jan. 12, 2005, at D2. 2. John M. Quigley & Steven Raphael, Is Housing Unaffordable? Why Isn't It More Affordable?, J. ECON. PERSP., Winter 2004, at 191, 191.

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