In his July 2006 cover story for reason, Joel Miller diagnosed America's real estate bubble in the very month the bubble popped. "In 1985," Miller wrote, "the median price for a home in the San Francisco Bay Area was about $258,000 in inflation-adjusted dollars; today, it's over $720,000." At that time in San Francisco, a person could theoretically "make more money simply owning a home than working a median-income job."
"The Politics of Sky-High House Prices" examined how local, state, and federal regulations were driving up the cost of real estate. Delays in permitting were adding $7 to $14 per square foot to the cost of residential housing. A large development in Sutter Basin, California, saw $2,000 per acre tacked onto its prices by environmental fees designed to protect garter snakes. When homeowners in Fairfax, Virginia, complained that government wasn't doing enough to boost "stagnant" home prices, the rent seeking was overt.
But state interventions designed to alleviate the shortage of housing also contributed to the problem. San Jose handed developers $180 million in affordable-housing subsidies to deal with a regional overpricing of real estate that was closer to $100 billion. And in other parts of California, "inclusionary zoning" requirements were adding up to $100,000 to the cost of a...