The Growing Divergence Between America's Most And Least Affordable Cities

If you've ever been to Houston, you know that the city has decided not to limit expansion with restrictive zoning laws. The city sprawls as far as the eye can see, with apartments next to restaurants, which are next to gentleman's clubs, which are next to luxury hotels. While not the "norm", this type of model has actually led to declining home prices since 1980.

As the Wall Street Journal reports, cities that have expanded their territory have been able to keep real-estate prices much more affordable than cities who have onerous zoning laws prohibiting expansion (or are unable to due to geographical constraints). Thus, a significant divergence is emerging in affordability between cities.

Cities with the highest increases in home values include San Jose, New York, Boston, Las Angeles, and Seattle. All of which are on the lower end of the expansion scale.

 

Conversely, cities with the least increase in home values include Houston, Dallas, San Antonio, Kansas City, Atlanta, Austin, Raleigh, and Atlanta. These are in the middle to high end of the expansion scale.

To put this into context, from 1980-2010, developed residential area in Atlanta grew by 208%, and real home values grew by only 27%. On the other hand, San Jose's residential area grew just 30%, while home values grew by 188%.

The following info-graphic shows where each city is on the scale

 

Over time, this could have a significant economic impact as firms and individuals look to locate themselves in areas with large pools of potential employees, and a lower cost of living for said employees.

Issi Romem, chief economist at real-estate site BuildZoom, draws the distinction succinctly: expansive cities versus expensive cities.

“If you don’t let the city grow, you’re going to get prices going upward...and see the middle class being pushed out,”

This would appear like a recipe for suburban sprawl, which has come under fire both for its environmental consequences and tendency to lead to oversupply that can lead home prices to crash.