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Home Publications Blogs Beat the Press Did Good Housing Policy Give Chicago a Bigger Bubble?

Did Good Housing Policy Give Chicago a Bigger Bubble?

Tuesday, 08 February 2011 07:53

Edward Glaeser is full of praise for the reign of Chicago Mayor Richard Daley. Among the items that he gives Daley credit for is a build-everywhere construction policy that Glaeser credits with keeping housing in Chicago affordable. He reports that the average condominium is about 30 percent cheaper in Chicago than in either New York or Boston.

Much of the reason for lower house prices in Chicago than in New York or Boston is that its housing market took a sharper plunge with the collapse of the housing bubble than in the other two cities. Prices were already lower in Chicago at the start of Daley's tenure in 1989, however they increased by an almost identical amount as in Boston through the peak of the bubble in the summer of 2006 (137 percent for Chicago versus 138 percent for Boston), although the cumulative rise was 21 percentage points less than New York's 158 percent. The biggest difference in housing costs between the three cities stems from the fact that house prices fell 27.8 percent from their peak in Chicago, compared to 21.0 percent in New York and just 14.0 percent in Boston.

It is not clear that Daley's housing policy can be blamed for the greater volatility in Chicago's house prices and it is always possible that the prices will fall more rapidly in New York and Boston going forward. However, if Glaeser had written his piece at the peak of the bubble, it would not have been possible to highlight lower housing costs in Chicago as one of the benefits of Daley's tenure.  

Comments (4)Add Comment
the cubs stink
written by frankenduf, February 08, 2011 8:09
duh- more (wealthy) people would rather live in ny and boston
written by izzatzo, February 08, 2011 8:47
... build everywhere construction policy that Glaeser credits with keeping housing in Chicago affordable.

Any economist knows that regulations like zoning cause shortages that were an essential cause of the housing bubble. This also explaines the housing sector in Chicago is currently generating so many jobs, because of the absence of uncertainty and regulation.
written by leo, February 08, 2011 9:48
"The average condominium sold in greater Chicago in 2009 was about 30 percent cheaper than the average condominium sold in New York or Boston."

I wanted to see what 'greater Chicago' consisted of for this fellow and from the report he cites, it's 'Chicago-Naperville-Joliet'.

While I think that's reasonable for the greater 'Chicagoland' area, there's a whole lot of real estate in that selection that is outside of the city of Chicago and the mayor's control.
CHeaper is better.
written by Floccina, February 08, 2011 4:05
I you make a strong case that the bubble effected more flexible markets more than less flexible markets but surely we can agree that cheaper is better.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.