"Excessive" Regulation Causes 80% Home Price Premium in the DC Area, Per Trump Administration

  • February 28th 2020

by Nena Perry-Brown

Are relaxed real estate development regulations becoming a bipartisan issue?

This month, the Trump administration, along with the Council of Economic Advisors (CEA), released a report on the nation's economy which cites regulatory hurdles as the main contributor to the housing affordability crisis.

The report limits the scope of this conclusion to 11 metropolitan areas, including DC and Baltimore, stating that constrained housing supply is caused by "excessive regulatory barriers" on the statewide and local levels. These barriers — which are cited as areas of reform like zoning, density maximums, parking requirements, and historic preservation, as well as more partisan issues like rent control, environmental and energy standards, and labor requirements — create an inelastic housing supply.

Estimated housing price premium created by regulations. Click to enlarge.

The report asserts that these regulations create a home price premium of 80% above housing production costs in the DC area, which ranks behind such areas as San Francisco (where it is closer to 180%) and Honolulu (where it is close to 160%). The report also calculates that homelessness in the DC area would be reduced by about 36% if excessive regulations were ended.

Estimated reduction in homelessness sans regulations. Click to enlarge.

In a perplexing move, the CEA report omits high construction costs from the housing production equation, stating that high demand and constrained supply lead homes to be priced much higher than it costs to construct them. Meanwhile, some DC developers have cited the tariff-spurred increase in construction costs for delaying new development.

This report aligns with the Trump administration's housing plan, cemented when a council was established last summer to focus on removing barriers to affordable housing production (although there has been debate over whether its expected tactics will be effective in increasing affordability).

Other reportage (and some Democratic presidential candidates) have also suggested that dismantling some regulations could create housing price relief by adding to supply. DC Mayor Muriel Bowser has tied current efforts to amend the Comprehensive Plan to ambitious housing production goals and the need to create more affordable housing options in the city.

Thumbnail photo by Ted Eytan

This article originally published at https://dc.urbanturf.com/articles/blog/excessive-regulation-causes-80-price-premium-in-the-dc-area-per-trump-admin/16517.

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