Land-Use Restrictions Set Stage for Mortgage Crisis, O’Toole Argues

Randal O’Toole recently visited the Independence Institute to discuss his new book, American Nightmare: How Government Undermines The Dream of Homeownership.

In an interview, he argues:

I looked at the financial crisis [in the book] and showed that the crisis wasn’t caused by things that people often attribute it to, such as low interest rates, subprime mortgages, or other national features. They really were only housing bubbles in some states: California, Oregon, Washington, Florida. A few other states had housing bubbles, but the other states didn’t have bubbles. And all of the states that had bubbles had one thing in common. They had land-use restrictions that prevented homebuilders from meeting the demand for housing. And that caused housing prices to shoot way up.

My view is that these regional restrictions worked in conjunction with federal policies to create the bubble.