Did planners cause the housing bubble? The Cato Institute's resident rabble rouser, Randal O'Toole, thinks so. In his latest of many shots at the discipline of planning, - "How Urban Planners Caused the Housing Bubble," (PDF Link Here) O'Toole blames a historically bad housing market solely on planners.
At the core of O'Toole's argument is a discussion over the impacts of growth management policies (i.e. Oregon's urban growth boundaries) on the supply of housing. O' Toole argues that growth management policies restrict the supply of housing so much so that housing prices inflate. Citing housing prices in states without growth management policies, he contends that housing bubbles were avoided because the supply of housing was able to respond to the housing demand.
O' Toole is able to focus sole blame on growth management by finding that nearly all housing bubble states (using questionable methodology, especially in the case of Nevada) have growth management policies. "Housing prices bubbled in 16 states, virtually all of which has some sort form of growth management," claims O'Toole.
While this is not the first (and last) time someone has argued growth management leads to increased housing prices, it is a novel attempt to pin the blame of the housing bubble and foreclosure crisis on planning. Most other explanations of the housing bubble and subsequent foreclosure crisis point toward lax mortgage lending standards and an over-speculative real estate market.
Keeping in mind that O'Toole is specifically criticizing growth management, not land use regulation in general, answer the following question: Is O'Toole's optimal scenario (no limits on growth) the best way to keep housing affordable and prevent communities from foreclosures resulting from volatile housing prices?
In your response, you may want to consider some elements O'Toole does not discuss in his article:
- Rental prices have remained stable, and are even falling in cities
- The fiscal impacts of sprawl
- Many urban areas, specifically in the Southwest (with and without growth management policies), over built their housing stock, leaving numerous developments empty
- Whether the housing market is a perfect market absent growth management policies
- Homeownership rates in growth management states vs non-growth management states (Go here)