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Did land regulations contribute to Florida's boom and bust?

Posted by: Peter Coy on August 26, 2009

Liberals tend to blame the bust we’re going through on underregulation. Conservatives finger overregulation. Example: Tight land-use controls that impeded housing construction, limiting supply and (temporarily) driving up prices.

Jay Brady, a writer for Florida’s Gulf Coast Business Review, recently wrote a long article arguing that land-use rules, mostly at the county level, were culprits in Florida’s soaring home prices, which of course ended with a huge bust. (He thought I’d be interested since the article quotes an article I wrote in 2006, “Boom! Bust! Boom?”)

Writes Jay:

Economic research reveals a series of government missteps led to over-regulation of the housing industry in Southwest Florida, “tragically distorting” housing and creating the root cause of the real estate crises.
Before the housing boom kicked off in 1997, a typical lot in working class Lehigh Acres was $5,000. At the peak of it, that same lot may have sold for $55,000.

And now, according to Brad Hunter, of housing development tracker Metrostudy, it’s back at $5,000 and may not have yet hit bottom. In one zip code in this 96-square-mile unincorporated city in east Lee County, one in eight housing units faces foreclosure.

For the whole article, click here.

Reader Comments


August 27, 2009 6:33 PM

No where did the article convince me that regulation CAUSED the boom bust and comes off as having an agenda. It did correlate but not cause it. Furthermore the article totally construes the context of "regulation" trying to pull land use regulation into the eternal dem/rep debate of regulating economic activity. Removing land use regulation to solve the problem would be like removing roads to solve traffic jams.


August 28, 2009 12:49 PM

The main thing that contributed to the bust was non-traditional mortgage products that encouraged people to stretch the limit on what they could afford through no down payments and option ARM loans.

Also include media hype and the shrills of shills who truly believed that Florida was running out of buildable land.

Reminds me of my fourth-grade social studies textbook, there was a picture of a guy standing on a "For sale" sign in the middle of a swamp, the caption read "Florida 1925". This lesson was relevant in 1988 and is still relevant today.


August 31, 2009 4:34 PM

The analysis in that article lacked depth. The only direct assertions of a policy change was the repeal of capital rate taxes in the late 1990's. This was arguably deregulatory but encouraged increases in home prices.

What were the regulations in Sarasota County that caused the restricted supply? He doesn't tell us that. I don't think he knows. He never makes that connection between the price volitility in Sarasota County and the papers from authors at right-wing and libertarian think tanks.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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