Okay, here’s a new one. This time the financial crisis isn’t the fault of the Community Reinvestment Act or Fannie Mae, instead “smart growth” is the problem. This argument depends on two ideas. One is that regulatory supply restrictions on housing were the main cause of the housing bubble, and the other is that smart growth is primarily about imposing new regulatory supply restrictions on housing. But as Ryan Avent observes, neither of those things is true. The first point is fairly obvious — look at Las Vegas and elsewhere and you’ll see that we had bubbles in all kinds of places.
The second point, however, is worth elaborating on. The idea of smart growth is that we shouldn’t have endless sprawl. That means that we should have less restrictions on housing supply in some places, but more restrictions in other places. For example, in the Washington DC area the dictates of smart growth indicate that we should let people build more densely in the places that are already developed. In particular we should be building much more densely within walking distance from our Metro, MARC, and VRE stations as well as creating new transit lines to serve currently developed areas that lack transit services. Then those areas, too, can become denser. But with greater density in our transit corridors, we won’t need to geographically expand the “built-up” portion of the area — allowing the fringe to remain full of farms and forests and what have you. Simply preventing people from adding to the housing supply anywhere would, clearly, create problems. But the idea is that instead of building new roads through currently undeveloped areas in order to turn the landscape into suburbs, we should focus more on developing the currently-developed parts of the country more intensively (and “smarter”). And one way or the other, the crux of our current predicament is that too many houses have been built, not too few.