BUTLER: Dumping 'smart growth' is wise

ANALYSIS/OPINION:

America is still trying to sort out the housing mess that helped trigger the recession. So far, most of the focus has been on how mortgage companies induced many modest-income families to get too deep into debt. More recently, attention has turned to borrowers who willfully took out mortgages and second mortgages to live a lifestyle they knew they couldn´t afford.

But there is another element to the story. In many areas of the country, Americans reluctantly took on huge mortgages as their last, best chance of homeownership. "Yes, house prices are incredibly high," the thinking went, "but they keep rising fast. I must buy now, even though it will stretch me to the financial limit, or we´ll never be able to afford a home of our own."

That kind of thinking fueled the housing bubble, too. But what made housing prices rise so fast in the first place?

One of the biggest culprits has been the fad of trying to control development by placing layers of restrictions on suburban land use. Going far beyond the traditional zoning restrictions, some local governments embraced a host of "smart growth" policies. But these policies also artificially inflated housing costs. So the cost of a home moved steadily beyond the reach of normal families - unless they got a subprime mortgage.

It turns out a better name would have been "stupid growth."

I first learned about terrible side-effects of "smart growth" when serving on a housing commission created in 1991 under President George H.W. Bush. The commission´s focus: Regulations that push up housing costs.

We learned about rules requiring minimum lot size and how they add to a home´s land cost and give developers the incentive to build larger, more expensive houses on their land. We learned how communities use "smart growth" zoning to keep out more affordable housing. And we learned of "impact fees" that are supposed to pay for public amenities, but often serve as just an additional tax that buyers must pay at closing time.

We heard about dozens of such rules, all helping existing homeowners watch their investment grow at double-digit rates year after year, and all pricing more and more potential buyers out of the restricted market.

My Heritage colleagues Ronald D. Utt and Wendell Cox have examined exactly how much land-use regulations have inflated housing costs in various parts of the country. So, too, have scholars at the Brookings Institution.

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