Smart growth and other restrictive land-use rules create housing shortages that force homebuyers to pay tens of thousands of dollars more for homes, according to a new report from the Tennessee Center for Policy Research.

The report — titled The Planning Penalty — finds that Tennessee’s housing prices are rising faster than the national average. This may be a result of housing shortages caused by the state’s 1998 Growth Policy Act, the group said.

The Growth Policy Act limits annexations and municipal incorporations, while requiring counties and cities to define future growth areas in an attempt to reduce urban sprawl.

“If Tennessee is not careful,” says the report’s author, economist Randal O’Toole, “it will soon find itself in the same position as Florida, with rapidly growing housing prices that threaten to devastate that state’s economy.”

Planning-induced housing shortages in Florida have forced homebuyers to pay thousands in extra costs for homes, he said.

These extra costs are the penalties people pay for buying homes in cities that use smart-growth planning, says the report. The cost of land-use restrictions exceeds $25,000 per median home in more than 100 U.S. metropolitan areas and ranges as high as $850,000 in San Francisco.

Such planning penalties are far greater than the so-called costs of sprawl. The most widely cited report on the costs of sprawl estimates that urban-service costs to low-density homes are about $11,000 more per home than to compact neighborhoods, it was stated.

“How smart is ‘smart growth’ if it costs homebuyers tens of thousands of dollars?” states Mr. O’Toole. “Instead of legislating where houses can be built, state and local governments should let people make their own choices about where they want to live.”

The report recommends that Tennessee officials take care not to create any barriers that would prevent homebuilders from meeting the demand for new housing. Open-space protection should be left to private organizations, while cities should apply user fees, rather than restrictive planning, to assure that growth pays for itself.

The Planning Penalty is available at the Tennessee Center for Policy Research’s website: www.tennesseepolicy.org.

The Tennessee Center for Policy Research is "an independent, nonprofit and nonpartisan research organization committed to public policy remedies grounded in the innovation of private enterprise, the ingenuity of individuals and the abilities of active communities to achieve a freer, more prosperous Tennessee."