Executive Summary

· Compared to the rest of the country, housing prices in Silicon Valley have been exceptionally high for decades. · Artificial limits to growth are the single most important cause of the Valley’s high (and volatile) housing prices. · “Lack of space ” is not the problem – housing density is not especially high in Silicon Valley, nor is open space especially scarce. · In a normal housing market, sudden growth in demand for housing can cause prices to increase in the short run. This, in turn, encourages increased construction, which eventually causes prices to adjust back to normal levels. · Unfortunately, Silicon Valley’s housing market is not normal. Numerous regulations limit housing growth. · Housing restrictions that are exceptional in Silicon Valley include zoning, building codes, affordable-housing requirements, development fees, urban growth boundaries, environmental review, and “open spaces.” · These policies are plagued by an intervention dynamic. Each new set of regulations leads to additional problems, which provide the motivation for yet another round of regulatory “solutions.” · Environmental and other anti-development attitudes have thus made the Valley’s housing market progressively less open, affordable, and responsive to consumer needs. · Housing restrictions especially hurt the poor, including immigrants, minorities, unmarried women, and young families. · Freedom is the best “affordable housing ” policy – freedom of contract, private property rights, and minimal regulation. i