Get Blog Updates on your iGoogle homepage:
| Urbanization and Affordability |
| Written by Bill Russell | |
| 06.30.2008 | |
|
Discuss this article on the forums. (0 posts) Though urbanization alone cannot explain high home prices, there is a relationship, as can be seen in the graph below. The graph shows the percentage of urban land in each of the 361 census MSAs verses the affordability index. In general, as urbanization increases, affordability declines. This relationship is weak. Urbanization only explains 5% of affordability variation. The graph also shows, in red, the 50 least affordable markets in the United States. It is interesting to note that controlling for urbanization, those 50 markets are all substantially less affordable than other markets with comparable levels of urbanization. For instance, Santa Cruz, CA has the same level of urbanization as Indianapolis, IN, but Santa Cruz is only 1/5 as affordable as Indianapolis (251 vs. 45). Likewise, San Francisco and Philadelphia have similar levels of urbanization, but San Francisco is only 1/3 as affordable as Philadelphia (55 vs. 156). The level of urbanization in these markets cannot begin to explain the lack of affordable housing. This supports my belief that the affordability problem in this country is not really a problem, but a conscious choice. Governments in some markets have chosen to keep substantial amounts of land from being developed, causing home prices to rise and affordability to fall. This is a policy choice, not a failure of the free market that requires additional subsidies or regulations requiring affordable housing. 
We're always looking for feedback from our readers.
|
))
| < Prev | Next > |
|---|
