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GMA Impacts on Mortgage Costs
The Smith family is interested in buying a suburban home built in the early 1990s. They will pay the following Smart Growth “tax” on the purchase of their home in the form of higher mortgage costs.
| Rate |
Florida* |
Washington** |
| 7.0% |
$14,989 |
$14,283 |
| 7.25% |
$15,367 |
$14,644 |
| 8.0% |
$16,522 |
$15,744 |
| 9.0% |
$18,105 |
$17,252 |
*Cumulative impact since 1994
**Cumulative impact since 1995
Calculations based upon the compounded interest due to financing the added costs created by the growth management laws in those state.
Source: Reason Public Policy Institute |
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A new study by the Reason Public Policy Institute finds that statewide growth management laws in Florida and Washington are costing homebuyers thousands of dollars. The report, released in December, show that Washington State’s Growth Management Act (GMA) was accountable for 26 percent of the increase in the state’s housing prices between 1995 and 2000.
Smart growth and Housing Affordability: Evidence from Statewide Planning Laws concludes that the GMA added $5,064 ($844 annually) to the price of a typical home in Washington State. Thus, over the life of a standard 30-year mortgage with a 7 percent interest rate, the GMA will add more than $12,000 to the cost of a home.
And the study reveals strikingly similar results in Florida, which also has a state GMA. Between 1994 and 2000, growth management laws added $5,425 ($775 annually) to the price of a home in Florida and were responsible for 20 percent of the increase in the state’s housing prices.
The study illustrates Washington State’s housing prices increased throughout the 1990s, but rose dramatically between 1995 and 2000-the years in which the growth management law took effect. Counties that were not planning under the GMA experienced significantly lower rates of increase.
In Florida, there is also a direct relationship between housing-price growth and the length of time a county plan has been in place. Counties planning longer under the growth management laws see higher housing prices. |
