LAND PRICE INFLATION AND AFFORDABLE HOUSING

Prices for standard lots and acreage were collected for 1975 and 1980 in 30 metropolitan areas and then analyzed, using multiple regression, to identify factors which would explain variations among metropolitan areas. Extreme price variations were observed. For example, from 1975 to 1980, the price of a standard residential lot increased as little as 31% in one area, while the price rose 1 76% in another. Over 80% of the variation in lot price increases was explainable by a model combining land supply and demand factors. In their order of importance, the factors were: (1) an index of regulatory restriction, (2) population increases, (3) per-capita income increases, and (4) job increases. The analysis suggests that public regulatory, infrastructure and tax policies can significantly affect land supply and demand and, in turn, prices. Communities that choose to manage growth must monitor land supply and demand and adjust their policies to ensure competitive noninflationary land markets. Otherwise major increases in land prices for housing and businesses may result.