Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

I’ll leave the monetary policy aspect to my colleagues. But let me make a couple of points about land use restriction. Certainly, land use restrictions, environmental restrictions, and those types of things have played a role in the rapid rise in house prices. That certainly is a factor. I mentioned in my briefing that I like to compare house prices to rent—and this is one of the reasons—as opposed to comparing them to incomes. If increased regulation boosts house prices, people are just going to have to pay more out of their income for housing because of the regulations put in place. But land use restrictions should affect rents as well. So, it should drive up the cost of buying a home, and it should also drive up the cost of renting a home. It can be a significant factor, but it should be in both of those elements.

And this is somewhat of an aside, but I find it interesting. I talk to a lot of builders as part of my day-to-day work here, and I’ve asked them about this very issue. They say definitely that land use restriction is a big concern for them. But I also went back and looked at newspaper articles written in ’86, ’87, ’88, and ’89, and it’s truly remarkable how the view back then was that housing prices could never fall because, as people were saying left and right, there was no more buildable land left due to environmental regulations and land use restrictions. They were saying that right up to 1989 when house prices leveled out in nominal terms. I’m not saying these things aren’t real— the builders say they are real—but they’re certainly not new though they may be new in their effects. But just to get back to the point, I think they should be captured in the price and the rent data.

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