Editor's Note: Gimme gimme sticker-shock treatment


When I moved to the Washington, D.C., area a couple of years ago from the small town of Oxford, Ohio, the most stunning difference was the cost of houses. Back in the Buckeye State, a four-bedroom, 3,000-square-foot house (with a study and a 1,500-square-foot basement) could be had for around $200,000. That same abode in the northwest quadrant of D.C. or close-in suburbs was priced over $1 million.

Yeah, yeah, I know, when it comes to real estate, only three things matter: location, location, and location. But as Joel Miller makes clear in this month's cover story, "The Politics of Sky-High House Prices," there's something else at work too, especially in the parts of the country where the cost of buying a home has zoomed into the stratosphere (see page 24). "The nation as a whole has no real shortage of cheap digs," writes Miller, the author of Size Matters: How Big Government Puts the Squeeze on America's Families, Finances, and Freedom (Nelson Current). "It's just that the cost of land and homes in certain areas has gone through the roof, mainly because zoning and other land use restrictions have made usable land scarcer."

In the D.C. metro area, median home prices in constant 2005 dollars increased a walloping $242,800, to the princely sum of $441,400, between 2000 and 2005. In the New York metro area, they rose by $248,200, to $553,200. In the San Francisco Bay Area, they climbed $217,000, to $721,900. Similar hikes are visible in many other metropolitan areas around the country, including Los Angeles, Chicago, Las Vegas, and Portland.

No wonder, then, that Census Bureau figures show people fleeing metropolitan areas for the "exurbs," or areas beyond traditional suburbs. According to numbers released in April, 18 of the top 25 metropolitan areas in the country "experienced average annual net outmigration" between 2000 and 2004. Those aren't just cities losing population but the areas adjacent to them too.

Certain areas will always be more expensive than others. But Miller documents various ways in which government at different levels adds unnecessary costs to home building. Ultra-strict zoning and molasses-slow approvals can add between $7 and $14 per square foot to the price of a new house. For a 1,500-square-foot unit, that can jack the cost by $10,000 to $20,000. Growth restrictions take a similar toll, as do environmental impact laws. In one California development, mitigating damage to 40 giant garter snakes ended up costing $93,950 per reptile. One study of the Seattle area found that more than $40,000 of one house's $223,600 selling price could be attributed to "government regulation and fees."

The good news is that thanks to increases in purchasing power, low interest rates, and an aging population, home ownership rates are at all-time highs: About 69 percent of Americans own their homes. But thanks to misguided, and often invisible, government policies, we may not be buying where we would first choose to live. Or otherwise be able to afford. That's a real loss—and one that deserves our attention and outrage.