It’s not just psychics and Alt. Med that’s woo woo.
The Economist reports (subscription may be needed), of a forthcoming article in the American Economic Review, entitled “Why Have Housing Prices Gone Up?” A conclusion is that a large portion of the increase in property prices is due to government restrictions on building new property. It’s basic economics: restrict supply and, all other things being equal, prices go up. The article states that by the year 2000, the value of what they call “permission to build” was more than 40% of the price of property in 27 US cities.
As they point out, this is significant because:
Since housing is by far the biggest expense for most people, any source of house-price inflation matters. Although zoning restrictions are often welcomed on the grounds of preserving the benefits of rural charm or urban character, their cost tends to fall disproportionately on poorer people.... By raising property values, planning laws act as a windfall for existing owners and a burden on those who rent or seek to buy. Since renters typically have lower incomes and wealth, zoning is often a highly regressive form of taxation
This is especially significant for residents of San Francisco where I live. Property prices are high here. But at least the lower income renters in SF are protected by rent control laws, so their rents are held down, right? No wait, rent control increases rents. Guess they’re screwed then.
The city government in SF restricts new building on the principle that if less property is built, fewer people will want to move here. Then they restrict the rents landlords can charge and assume this will result in low rental property becoming available. Yes, the city government thinks it can repeal the laws of supply and demand. Good job I bought my property in 1998.