Local Development Policies and the Foreclosure Crisis in California : Can Local Growth Policies Hold Back Global Tides?

There is a longstanding academic debate regarding whether local governments can meaningfully shape their long run fortunes through their own policymaking, or whether the autonomy of localities is swamped by larger macroeconomic forces. In the arena of development policy, specifically, some studies question whether, for example, local attempts to limit the pace or form of growth actually have the intended effects. We consider this set of issues by examining whether California municipalities' policy orientations toward residential development – as measured in the late 1990s by surveys of local officials – are related to the incidence of foreclosures across these cities as of 2008. Controlling for a variety of local economic, demographic, and geographic characteristics, we find that in those cities where local officials said that citizen opposition or city council opposition tended to limit residential growth, foreclosures were less likely a decade later; homes in such cities also tended to lose less of their value. In short, although the “mortgage meltdown” and foreclosure crisis of the past few years may be viewed as an unstoppable force of national or international dimensions, antigrowth cities in one hard hit state apparently were able to moderate the severity of this contagion