Why is Land So Cheap In The Inland Empire? Maybe it is a lack of a "Zoning Tax"

Here is an interesting paper that compares construction costs with housing costs. The question is, why is there such a huge gap in some cities between the cost of constructing a home and the final price of the structure?

If we look at some coastal regions we see that property values are really high, because these are high-amenity areas. However, in looking at the data there are plenty of developable sites around these high-cost regions that could be developed, and if houses were developed on these parcels than the prices of homes should decrease and the gap between the construction cost and the final value of the home should decrease.

However, there are barriers to building in these areas imposed by local governments, the so called "zoning tax" that includes all the costs of increased government regulation into the housing construction costs. In principal the gap between the construction costs and the final product costs includes the cost of land, plus the "zoning tax".

If we work backwards, areas that have few zoning requirements will have cheaper buildings because is it easier to build in these areas. (*cough* Inland Empire). The opposite of the "zoning tax" would be basically to offer incentives by local governments to get job creating developments into their regions (*cough* High Desert).

The paper includes some interesting statistical tools to tease out the extent of the "zoning tax" along with some other government regulation observations.

Hat Tip to my fellow Colliers researcher, Mr. Soto.