Reminds me of how there is a progressively larger and larger group of contractors that will NOT do business in Minneapolis because of the over-burdensome regulation and fees. I'd be curious to see how much these costs vary based on the municipality they're in.
Minneapolis like many major cities use their "licensing" requirements to create monoplies to help out unions.
ReplyDeleteYou can get a Minnesota State License for electrical, plumbing, general contracting, etc.. and can work anywhere in the State- EXCEPT for Minneapolis and St Paul. There you need a "special" City license - which just so happens to be controlled by the unions...
Glad there is no corruption there!
I've always thought that an interesting economic study would be to look into the correlation between the difficulty in getting a housing development started vs. the volatility in housing costs. My hypothesis is that if a project is cumbersome to start, then small increases in price will not lead to new capacity. Prices will have to go up dramatically before a developer sees a worthwhile return, so housing prices rise dramatically before supply is added. This dramatic rise pulls in a bunch of developers at the same time, so lots of new supply hits the market, eventually depressing prices. Conversely, in "easy" states a small price increase leads to a more immediate supply increase. I think this could easily explain the difference between the California and Texas housing markets, but I'm not sure how Nevada would fit in. Perhaps this kind of research could be undertaken by a freelance economist with time on his hands. Do you know of one?
ReplyDeleteBritish Columbia is like that in regard to commercial construction. Every year there are more documents required and more fees to pay before a store is allowed to open. The construction manager for one chain told me it costs them at least $10,000 more to open a store in BC than any other province.
ReplyDeleteYou are spot on Jaime.
ReplyDeleteI am familiar with the Twin Cities market - one of the biggest problems our market faced during the boom is lack of developable land.
Sure we had tons of vacant land, but it was within the "metropolitan council"s MUSA (metropolitan urban sprawl admin). There objective was to cut off access to sewer/water to prevent "urban sprawl".
What we got instead to meet the demand was "leap-frog" communities. (such as St Michael, Otsego, Elko, etc.) Developers went to these close communities to tap off their sewer/water system and also did 2.5 -5 acre lot subdivisions in between where well and septic systems were permitted. The result was compounding of the perceived problem of urban sprawl.
They made it much worse.