Sneaky Reasons That Affect The Housing Market

Think of zoning laws as the backstage crew of the housing market—nobody notices them until they change the whole show. If a city or neighborhood decides to allow for more multi-family units or higher-density developments, it can alter the demand for homes, sometimes drastically. A sleepy, low-density area can suddenly become a hotspot for developers, driving up competition for land and homes. On the flip side, if zoning restrictions get tighter, it can limit development, making homes scarcer and pricier. It’s the kind of low-key change that sneaks up on homeowners and investors if they’re not paying attention to local council meetings.

In Minneapolis, back in 2018, the city made history by eliminating single-family zoning, allowing multi-family housing to be built in previously restricted areas. This “Minneapolis 2040” plan was designed to address housing shortages and racial inequalities. As a result, property values in some neighborhoods surged, while others cooled down, depending on how close they were to these new multi-family developments. This game-changer showed just how powerful zoning laws can be, even if most folks didn’t see it coming.

Living with the risk of wildfires has become a bigger concern out west. As more areas are classified as high-risk zones, insurance premiums can skyrocket, adding to the overall cost of owning a home. Not only that, but stricter building codes in these regions can increase construction costs for new homes, and that pushes up prices. Plus, potential buyers might get skittish about purchasing in a zone where evacuation could become part of their routine. All of these subtle factors combine to make properties in wildfire-prone areas less attractive, which could shake up local home values more than you’d think.

In 2018, the town of Paradise, California, was nearly wiped off the map by the Camp Fire, the deadliest and most destructive wildfire in California’s history. After that, homes in wildfire-prone areas saw their values drop as buyers started to reconsider living in high-risk zones. Insurance companies also began pulling back coverage or significantly raising premiums, making it even harder for homeowners to afford to live in these regions. The aftermath of the Camp Fire sent shockwaves through real estate markets all over California, highlighting the hidden dangers of owning property in fire-prone areas.

With the push for greener, more sustainable living, new environmental regulations are quietly reshaping housing markets. Laws that require energy-efficient building materials or limit construction near environmentally sensitive areas, like wetlands, can drive up the cost of new developments. For builders, meeting these new standards means higher costs and those expenses are often passed on to buyers, making homes more expensive. While these regulations aren’t as flashy as interest rate changes, they can have a significant, long-term impact on home prices, especially in regions where environmental protections are a big deal.

In 2020, California rolled out stricter environmental regulations requiring new homes to include solar panels as part of the state’s goal for a greener future. This added several thousand dollars to the cost of building a new home. While this regulation wasn’t necessarily front-page news, it has slowly pushed up home prices in California, especially in areas with tight housing supplies. Builders had to absorb the additional costs of complying with these green building standards, and naturally, those costs trickled down to buyers, impacting the real estate market.

When a city or area improves its transportation network—like adding new train lines, bus routes, or highways—it can suddenly make previously overlooked neighborhoods more attractive. Areas that used to be considered “too far” from major job centers or city amenities become more accessible. As a result, demand for homes in these newly connected areas goes up, often leading to a rise in property values.Convenience is a major selling point for homebuyers, so when people realize they can cut down their commute or avoid traffic, they’re willing to pay a premium to live closer to those new transportation links. Developers and investors also take notice, leading to new developments and further driving up prices.

Think back to 2016, when the Los Angeles Metro expanded its Expo Line to Santa Monica. Suddenly, areas like Culver City and Palms, which were once overlooked, saw a spike in home values as people realized they could commute easily to downtown L.A. without the nightmare traffic. New public transportation routes or improvements can make a once “too-far” neighborhood a hot spot for buyers looking for convenience, driving prices up without much fanfare.

Properties in high-risk areas, like flood zones or regions prone to wildfires, hurricanes, or earthquakes, typically see lower demand due to the increased risks associated with living there. Homes in these areas often require more expensive insurance, which can deter potential buyers. Plus, after a natural disaster, homes in affected regions may experience drops in value as buyers become hesitant to invest in properties that could be damaged or destroyed in the future.

On the flip side, homes outside of disaster-prone areas can become more desirable—and more expensive—as people seek safer locations. Buyers start prioritizing safety, pushing prices up in areas that are less vulnerable to natural disasters.

After Hurricane Harvey hit Houston in 2017, neighborhoods that were prone to flooding saw home prices drop significantly, while areas on higher ground became more desirable—and more expensive. It wasn’t just about rebuilding after the storm; people were suddenly hyper-aware of flood zones, and it changed the way they looked at properties. Homes in these riskier areas can become harder to sell or insure, causing prices to dip, while safer spots suddenly become the go-to, sending those prices up.