The chapter “Urban Facts and Fallacies” by Thomas Sowell is definitely an interesting read compelling reader to reflect on every fact stated by the author. The Housing section of chapter was shocking and eye-opening and starts from providing truth of the biggest “fallacy” as called by author that government intervention is required in the housing market to control the upper limit of price of houses. The reading is directed to break this fallacy to make readers realize that due to government intervention, the prices have actually skyrocketed. It is a well known fact that prices of houses has increased many-folds in past some decades and due to continuously rising prices, government has to intervene to ensure that the prices remain affordable. However, the history of houses discussed by Sowell reveals otherwise.
The imposition of several government regulations on housing market and several laws passed by government pushed the prices upward as it became difficult to obtain permission for constructing houses or there became several rules and regulation which were to be followed while constructing the houses. The author states that policies like “smart growth” and laws like “open space” were the restrictions on housings which makes some area barely affordable. Though the facts and statements presented by Sowell are impressive, I would not agree with them.
The restrictions by government can’t be accorded to the government’s motive to control the housing market and raise the prices; on the contrary the various policies and laws have been implemented by government to stop excessive urbanization of the cities. Environmental regulations such as smart growth and other state and local regulations are intended to preserve and improve the environment quality; to preserve ecosystems which include wildlife also, and for human health protection. These regulations are enacted to restrict the sprawl of urbanization and to limit the supply of land for housing purposes. An example of this could be regulation on wetlands in order to preserve them from encroachment. National Wetland Inventory United States provided the results of the reduction in wetland loss from 1986 to 1997 and stated that due to regulations on wetland, the loss of wetland has been decreased by 58,500 acres annually, which is a marked reduction by 80 per cent from previous decade.
Sowell presents a unidirectional view of the housing problem without taking into consideration the reasons behind the laws and regulations implemented by government. Preservation of natural ecosystem is also government’s responsibility and it has to create balance between the houses required and the ecosystem capacity. Every area has its own capacity of holding people, which when grows beyond it starts impacting the ecosystem of that area in negative manner. Encroachment of forest area and wetlands is the common problem encountered during early twentieth century and because of endangered species and environment constraints, such stringent regulations have been enacted.
The smart growth law as mentioned by Sowell has increased the prices of those areas because of their increased demand in the housing market. In sync with the law of supply and demand when the demand of a commodity increases, it prices increases. Similarly, houses in smart growth area are designed in compact, and environment friendly manner comprising of compact neighborhoods, transit-oriented development and bicycle and pedestrian friendly road design. With the increase of the income, people desire to live in better houses which increase the housing demand in the market pushing prices upward. People in smart growth areas show awareness about environment footprint along with government and the increasing sprawl of housing led to the enactment of such regulations by government.
The high prices of housing can be understood on the basis of market equilibrium which states that when the demand of a product is high and supply is moderate, the price tend to increase. Similarly, the prices of housing in good localities are high as stated by Sowell. However, author overlooked an important aspect of the high housing prices. The prices are high for houses in uptown locations which are beautiful and provide healthy living conditions because of government regulations. The houses available in downtown where living conditions are not as good as uptown areas, the price are also low. With the increase of income, the requirement to reside in a better surrounding also increases, thereby driving the prices up.
The political interventions through political lobbying and wealthy, influential people increases the prices of housing, this argument is the weakest in the whole housing section of the chapter. Though I agree with Sowell that to some extent, political interventions impact the prices of house in housing market, the government intervention or collaboration in this could not be agreed to.
I would regard the literature by Sowell an interesting and absorbing read, however will not be convinced by the argument that housing prices have increased because of government interventions. The paper is seriously biased and all the supporting evidences to argument are viewed with single point of view.
Ballard-Rosa, Garett. "15 communities selected to receive free smart growth technical assistance." 16 November 2011. Smart Growth America. 6 February 2012
Kiel, Katherine A. "Environmental Regulations and the Housing Market: A Review of the Literature ." Research Paper. 2004.
Nelson, Gabriel. "'Smart Growth' Taking Hold in U.S. Cities, Study Says." 24 March 2010. The New York Times. 6 February 2012
Sowell, Thomas. Economic Facts and Fallicies. Basic Books, 2008.