Local Governments Deserve Some Blame for Real Estate Chaos
It has largely been ignored in the press — the role that the huge increase of new construction in some locales must have played in the real estate crash and subsequent mortgage havoc. Local governments in many areas seemed to care little about anything other than the increase in tax revenue they could realize when developers added houses to vacant land. A recent article in Seattle’s Puget Sound Business Journal appears to confirm that uncontrolled growth in response to rising home prices played a large part in the subsequent crash and damage to the economy.
Seattle and San Diego are two West Coast cities that experienced the mortgage crisis very differently. While builders in San Diego took out approximately 9700 building permits for single family residences each year from 2002 to 2006, Seattle granted only about 1,300. Growth-control legislation kept the lid on oversupply and cushioned the area from the crash that hit places like San Diego. Foreclosure and home value erosion was minimized, whil San Diego’s economic disaster has been well-documented nationally.
Residents in all counties wishing to protect their real estate investments would be smart to keep an eye on their elected officials and local growth plans. It would probably be unrealistic to expect the next group of supervisors or representatives to learn from this crisis and prevent the next one without some prodding from watchful citizens.
