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U.S. Is Running Short of Land for Housing

Land-use restrictions, lack of public infrastructure investment and rising land prices contribute to the issue. Land accounts for about 47% of U.S. home values.

NEW YORK – Land suitable for housing is increasingly scarce in the United States due to land-use restrictions and a dearth of public infrastructure investment. Land prices are rising as developers try to encourage migration to large cities, which exacerbates the housing shortage.

CoStar Group’s land-listing website Land.com reports that the average price of vacant land per acre in the Sunbelt more than doubled in the past two years through the second quarter. Few investors are bidding on deals even as land prices remain high, and some landowners worry about a downturn similar to the 2008 crash, when home and land values plunged.

The land price surge has been lucrative for homeowners, as Rutgers Business School Professor Morris Davis says land now accounts for 47% of U.S. home values, compared to 38% 10 years ago.

Asking prices for homes in new communities such as pristine acreages in Tampa go as high as $900,000, partly because the land underneath is so precious, mainly due to land-use regulations. Tampa’s zoning rules bar developers from building anything larger than a single-family home in much of the city, which has raised the price of developable land.

The S&P CoreLogic Case-Shiller Index estimates that home prices in the Tampa metropolitan area climbed 35% between early 2021 and early 2022.

Most economists say municipalities need to ease zoning rules and other constraints to reduce land inflation and build more housing, which homeowners rarely welcome.

Source: Wall Street Journal (09/25/22) Putzier, Konrad

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