I’ve had a feeling for some time that there was some correlation between counties issuing building permits indiscriminately and the subsequent crash in area real estate values. Here in Reno they are still approving new developments as fast as they are asked for, and yet we all know Nevada was one of the hardest-hit states by the real estate crash / lending crisis. I started a research project, putting together data concerning the number of building permits issued in the best and worst areas for home appreciation / depreciation, the population, growth trends, and subsequent damage to real estate values. It’s a huge project and data isn’t uniform or easy to come by.

However, the Puget Sound Business Journal has already put some of this on the map on a smaller scale, and it’s conclusions justified my suspicions. The study / article compared the effect of the real estate / mortgage havoc on King County (Seattle) and San Diego County homeowners. In Seattle’s case, state limits on growth forced the county to limit SFR building permits to about 1,300 a year, even during times of appreciating home values. San Diego County developers, on the other hand, were far less restrained by growth plans. Local officials, likely swayed by the extra tax revenue generated by developed property, had no problem with unfettered development. Hence the oversupply, which led to the drop in values, which led to the inability of borrowers to sell or refinance, which led to lenders foreclosing on homeowners, which fueled a further drop in value, ad nauseum. seattle, on the other hand, has weathered the downturn much more successfully, not being overburdened by a huge oversupply of homes.

It’s a little short-sighted of county supervisors or city officials to allow over development. While it makes it easier for new people to move in and afford homes it’s terribly hard on those who already live in the area. And the toll on the local economy and society has proved to be staggering. Officials see additional revenue and drool — until the drop in property values and assessments, and subsequently sales and other taxes takes its toll.

It’s unlikely that the next group of leaders will have learned from the current crop, and there will be undoubtedly be a move once again to kill the golden goose by getting greedy for property tax revenue. Citizens who care about their property values and their neighbors should keep an eye on their local officials and know that a sensible growth plan is being followed.