Housing and the Corruption Tax
By Arnold Kling
In recent years, the difficulty of getting things built has made business harder for small, local builders and easier for big companies, with their greater resources, to gain control of the housing market. “The large builders have taken the position: we’re just going to fight,” Chris Mayer, a housing economist at Columbia University’s business school, says. ” ‘We have lawyers, we have experts, we have money, we’re going to buy these tracts of land and fight it out’ ” – that, according to Mayer, is their position. “That has proven very time-consuming. But the local builder who used to have the benefit of knowing the local people – that has become far less important than the ability of the big builders to fight the current regulatory environment.” As Mayer points out, virtually every state in the country now has policies to restrain developers. No matter the region, he says, the small developer is at a tremendous disadvantage.
One reason for higher home prices might be called the corruption tax–the amount that builders have to pay to get past development regulations. Apparently, the corruption tax is driving small developers out of business.
Thanks to Alex Tabarrok for the pointer.