Rethinking Housing: Commodity vs. Investment

The New York Times reported on a study by economists Ed Glaeser of Havard and Joe Gyourko at the Wharton School that examines what would happen to housing prices if we thought of housing as a commodity rather than an investment. The idea behind this shift in thought is that instead of seeing a period of rapid price growth as a "recovery," prices would remain more stable, allowing for improved mobility and lowered barriers to entry for young buyers. The study also examines the impact of land-use regulations, which in many cities have drastically inflated prices. A recent estimate by economist Chang-Tai Hsieh from the University of Chicago puts the negative impact of local land-use regulations at $1.5 trillion per year. The authors conclude that thinking of housing as a commodity and eliminating land use and design regulations that artificially drive up prices could lead to significantly lower prices in many of the most expensive cities in the United States. Read more.