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Jerome Lyle Rappaport

Jerome Lyle Rappaport
Founder and Board Member
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Edward Glaeser

Edward Glaeser
Professor of Economics at Harvard University
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Stephen P. Johnson

Stephen P. Johnson
Executive Director of Phyllis and Jerome Lyle Rappaport Foundation
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Greg Massing

Greg Massing
Executive Director for the Rappaport Center for Law and Public Service
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Alasdair Roberts

Alasdair Roberts
Professor of Law and Public Policy at Suffolk University Law School
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Joseph Curtatone

Joseph Curtatone
Mayor, City of Somerville
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Tim H. Davis

Tim H. Davis
Independent Research Consultant
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Scott Harshbarger

Scott Harshbarger
Senior Counsel, Proskauer Rose LLP
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Vivien Li

Vivien Li
Executive Director of The Boston Harbor Association
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Guest contributors

Monika Bandyopadhyay
Suffolk University Law Student

David Barron
Harvard Law School and former Deputy Counsel for the Office of Legal Counsel in the US Department of Justice

Linda Bilmes
Senior lecturer in public policy at the Harvard Kennedy School. Assistant Secretary of Commerce during the Clinton Administration.

Brandy H.M. Brooks
Director, Rudy Bruner Award for Urban Excellence, Bruner Foundation

Felicia Cote
Rappaport Fellow, Harvard Law School/Harvard Kennedy School.

Amanda Eden
Suffolk University Law School student

Sara Farnum
Student, Suffolk Univ. Law School

Kristin Faucette
Student at Suffolk University Law School

Benjamin Forman
Research Director, MassINC

Arthur Hardy-Doubleday
JD/MBA student at Suffolk University Law School and the Sawyer School of Business

Theodore Kalivas
Boston Green Blog, Dukakis Center for Urban & Regional Policy

David Linhart
Student, Boston University School of Law

Antoniya Owens
Research Analyst, Mathematica Policy Research, Inc.

Susan Prosnitz
Senior Advisor, TSA, Washington, DC

Ben Thomas
Boston Green Blog, Dukakis Center for Urban & Regional Policy

Matthew Todaro
Student at Boston College Law School

Alexander von Hoffman
Senior Researcher, Joint Center for Housing Studies

Brett Walker
Student, Boston College Law School

Margarita Warren
Student at Suffolk University Law School

Regulation and the Rise in Housing Prices in Greater Boston

Thursday, January 5th, 2006
By Edward Glaeser

In well-functioning markets, when prices rise, supply increases, and then prices stop
rising and sometimes even fall. By this defi nition, the housing market in the greater
Boston area is not working.
The market is sending clear signals about the demand:
• Between 1980 and 2004, housing prices in three of the Census Bureauʼs
divisions of the Boston metropolitan area grew by between 179 and 210 percent
(adjusted for infl ation), which made these areas—Boston-Quincy, Cambridge-
Newton, and Essex County—second through fourth in the nation behind only
the New York areaʼs Nassau-Suffolk Division.
• According to data from the National Association of Realtors in the third quarter
of 2005, the median sales price for existing single-family homes in the Boston
metropolitan area was $430,900, more than any other region in the continental
United States except for portions of California, greater New York City, and the
Washington, D.C. metropolitan area.
Supply, however, is not keeping up:
• In the 1960s, there were 172,459 units permitted in the Boston metropolitan
area; in the 1980s, 141,347. However, despite the sharp rise in prices in the
1990s, only 84,105, units were permitted in that decade.
• The decline in permits has been particularly striking for units in multi-family
buildings. In the 1960s, less than 50 percent of all permits in the Boston
metropolitan area were for single-family homes. In the 1990s, over 80 percent
of all permits were for single-family homes.
Some of the price increase can be explained by the regionʼs dramatic economic
renaissance in the past three decades. However, other regions have boomed without
experiencing dramatic increases in house prices. Until the last quarter, for example,
median housing prices in the Phoenix area were less than $200,000 and in the
Houston area the current median sales price is $142,000. Local governments in
Phoenix area handed out 57,273 permits for single-family homes during 2004, Las
Vegas area localities 35,579—local governments in the greater Boston area only
5,001.
Is Greater Boston Running Out of Land?
There are two theories about why so little new housing is being built in Greater
Boston. It may simply be that the area has run out of land. After all, the Boston
metropolitan area is one of the countryʼs most dense metropolitan areas. Alternatively,
the shortfalls in supply may be the result of restrictive land use regulations.
There is little evidence to support the view that greater Boston simply lacks the land
to build new homes. Within the urban core, it would be quite feasible technically to
build taller buildings. In fact, with strong support from the city, a host of new highrise
residential housing has been built or is being built in the heart of Boston. While
densities outside of the core are high relative to the United States as a whole, they
are still quite low, averaging 1.4 acres per home for communities within 50 miles of
Boston. Moreover, if land were just scarce, then the price of a quarter acre of land
would be the same whether it extends an existing lot or if it sits under a new home.
However, Glaeser and Gyourko (2002) fi nd that a quarter-acre is worth 20 times more 

For the full text of this article click here.



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