Do Urban Limits raise house prices?


k9xbp03bx04zhnb_wgs5mfxtlzubdwgxg6cujvngiluThis little gem was posted on Reddit’s urban planning board, with the title “The relationship between the cost of housing and how much cities are allowed to sprawl onto new land“.

Note the key word “Allowed”. The user who posted the image, /u/Sidewinder77, implies that urban authorities who disallow urban expansion are the sole cause of house prices.

If most cities didn’t have rules that prevent people from easily constructing low density communities of mostly single-family homes, I wonder how affordable housing could be?


But there’s a major flaw in this reasoning.

Most US cities don’t disallow the construction of low density, mostly single family home neighbourhoods. 

Wikipedia has a handy list to help us out here. Note this short list starts with “Notable” and goes on to name cities in Kentucky. It does not seem that growth boundaries are endemic across the US.

Notable U.S. cities which have adopted UGBs include Portland, Oregon; Boulder, Colorado; Honolulu, Hawaii;[9] Virginia Beach, Virginia; Lexington, Kentucky; Seattle, Washington; and San Jose, California. Urban growth boundaries also exist in Miami-Dade County, Florida and the Minneapolis–Saint Paul metropolitan area of Minnesota. Portland, Oregon is required to have an urban growth boundary which contains at least 20,000 acres (81 km2) of vacant land.

Urban Growth Boundaries in the United States (Wikipedia)

Now, when we look at the original graph we can see that it isn’t so much a story of what the government allows. San Francisco, New York and Boston have no mention of urban growth boundaries, yet have all seen major price increases.

The issue is much more simply at heart: supply (of housing) versus demand. All three of those cities have just “run out of room”. This crisis however is artificial. That price rise could probably be negated simply by allowing people to build more units in the existing space. I say probably because you will find no US city that adopts a laissez-faire attitude to urban form.

Yes, an urban growth limit does restrict supply and that does result in a price rise (eg Portland). However, you can adopt a strategy of allowing intensification of the existing urban area to add more units (either through dividing existing units, building taller or with higher lot coverage)  and avoid these pains.

The problem is having strict limits on both vertical and horizontal growth as Portland has done deliberately or how the Bay Area has done accidentally (vertical growth limits combined with horizontal obstacles).

The US has regulated itself into a corner, where the only options are to build few new units or horizontal sprawl. This means supply will run out, and house prices will sky rocket, even when urban boundaries or similar measures are not employed.

Finally, don’t think that horizontal growth boundaries are used throughout the US. In fact most US cities and the federal government encourage such growth: Large subsidies are given for motorways that are required for the resulting auto dependent suburbia; Intensification of existing suburbs is nearly always forbidden through the use of zoning laws or private deed restrictions (forcing the city to grow only horizontally); federal and state standards of road construction and federal mortgage schemes that favor low density, single home construction.


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