Randal O’Toole of the Cato Institute was in town today offering a novel explanation for the housing bubble that resulted in the 2008 financial panic and subsequent Great Recession. O’Toole argued the culprit was not loose monetary policy, complex derivatives, greed, poor lending standards, lax government regulation, shoddy ratings for mortgage-backed securities or any of the other usual suspects.
Instead, he said strict land-use policies in certain states made housing prices begin skyrocketing in toward the end of the 20th century, to levels that were ultimately unsustainable. He said it was the burst bubble in those states, circa 2006-07, that led to the financial crash of 2008 — and, following that, depressed housing prices in states without so strict land-use policies, such as Georgia, beginning in 2008-09.
I’ll offer a more thorough explanation of O’Toole’s argument after I’ve read his new book and, in the interest of fairness, I urge you to refrain from trying to shoot