The High Cost of Regulating Development
The High Cost of Regulating Development
Housing prices have risen in the United States and Hong Kong mostly because of the high regulation costs of development. In each of the developed countries, a very large array of complex regulations has made development difficult and effectively prevented housing supply from responding to demand. The problem is not market competition, but government regulations that prevent markets from functioning properly. The rising ratio of capital to income is almost entirely due to the rise of housing. What begins initially as inequality in housing wealth gets transmitted into the next generation and is transformed into other forms of inequality, in particular inequality in opportunities, with other distributional consequences.
Keywords: Thomas Piketty, Regulation, Housing capital, Inequality of income and wealth
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