A Surprising Source That’s Keeping the Housing Bubble from Bursting

My man Andrew Cassel came through again, and this time on a topic
we've studied to the gills in one of my classes, no less. He weighs
in on the housing bubble in yesterday's Inquirer, and conjectures that
there's still plenty of wind in these sails. But his reasons are
unusual, and they are related to the fussiness most people have about
the building of new houses.

It seems people don't like new houses anywhere. If it's on the
suburban fringe, their progressive sensibilities are offended and they
cry, "Sprawl!" If it's in an urban infill area, they calculate that
increased housing supply plus waning housing demand means a drop in
prices, and perhaps a precipitous enough one that all the equity
they've built up in their homes will come leaking out. If it's a
matter of crowding more houses on the same footprint, like with
townhouses or other multi-family vehicles, well they just don't like
having less elbow room in their community or vying with more cars on
their streets.

And let's not get started with the visceral reactions people have
towards mega-builders like Philadelphia-area's Toll Brothers. These
builders of bland McMansions are vilified by some as what's gone wrong
with American life. So an application for new housing, especially by
Toll Brothers, is bound to get the neighbors in full force at the
local zoning hearing.

How ironic then, according to Cassel, that such fuss actually
contributes to Toll Brothers' bottom line and its dominance in the
home-building industry. For increased zoning fussiness across the
country has made securing a spot of land upon which to build houses a
long, legally drawn out, and therefore expensive endeavor. This has
contributed to a concentration of power among the biggest builders, of
which Toll Brothers is one, for they alone have the economies of scale
to pay for lawyers and such.

In fact, Cassel quotes in his column that the top ten builders
together control a fifth of the market, double what they controlled
just eight years ago. With that concentration comes an easier
landscape for Toll Brothers and others to simply pass on the added
cost of securing land to their customers in the form of higher house
prices. So fussy zoning hearing attendees, take heart, for your
battles against Toll Brothers are not in vain: even if you lose, your
reward is that the high-priced houses they build will ensure that your
house remains high-priced.