My BiggerPockets forum post got some buzz when I published data on whether blue states “appreciate” more than red. My intention here is to expand on the original idea: Do a state’s or city’s politics have any meaningful effect on home price appreciation?
While you can view the post, my data, and other investors’ opinions, here’s a brief summary of what I found.
Do Blue States Appreciate More Than Red States?
To begin, I looked at each state’s voting history over the past five elections (over the past 20 years).
If certain states voted red in 2024 but voted blue the majority of the time, I show them as blue here—like Michigan, for example, which voted blue three times over the past five elections.
Now, here’s a map of each state’s median price growth over the past 10 years using Zillow data.
It looks like the majority of states with the most growth were pandemic boom states like Idaho, Nevada, Tennessee, Georgia, Utah, and Florida. All these states voted red in the 2024 election.
But it’s also worth pointing out that the blue states of Maine, New Hampshire, and Washington also saw solid growth.
So what about 20-year growth?
Zillow didn’t have 2005 data for Montana or North Dakota, but the states with the highest 20-year appreciation were Idaho, Utah, Washington, Tennessee, and Oregon.
Unfortunately, this still doesn’t tell us much.
Is there a way to mathematically describe any relationship between 20-year voting history and 20-year price appreciation? Sort of.
I calculated the correlation between each state’s growth and the categorical red or blue variable. This result came as no surprise to me: The correlation coefficient came in at 0.03.
In English: There doesn’t appear to be any relationship between a state’s voting history and its price growth.
However, you might be thinking: This is at the state level—what about the city level?
City-Level Zoning Policies and Price Growth
How might a blue state’s policies affect its most popular cities? After all, a state’s median price can be dragged down by lower-priced rural areas, such as California.
Speaking of California, I grew up in Los Angeles, and I’ve been to quite a few real estate meetups out here. I heard local investors mention that blue state policies, such as zoning restrictions and rent control, actually benefit their investments because these policies can limit supply, which then forces appreciation.
But is this even true? Well, yes.
A 2003 study co-sponsored by the Federal Reserve Bank of New York stated, “The bulk of the evidence marshaled in this paper suggests that zoning, and other land-use controls, are more responsible for high prices where we see them.”
And what about rent control? Well, as my economics teacher liked to say, there is no free lunch.
There are many papers published on the pros and cons of rent control, but the Federal Reserve Bank of St. Louis sums it up quite nicely: “Economists have found that following the introduction of these policies, rental stock typically declines through channels like the conversion of rental units to owner-occupied units and major unit renovations.”
But why would rent control actually decrease rental stock? I’d like to point to San Francisco as an example. A 2019 study published in the American Economic Review found, “Landlords treated by rent control reduce rental housing supplies by 15% by selling to owner-occupants and redeveloping buildings.”
Rent control aside, strict zoning regulations keeping supply artificially low seem to be a much bigger problem. We also know that local governments enact rent control when they deem housing too unaffordable. But why would housing become unaffordable in the first place? Because there’s more demand than supply.
So, while we do have evidence that rent control may make affordability worse for future tenants, for my next analysis, I only looked at cities and their price growth and how strict their zoning regulations were.
Take a look at the graph I made.
The yellow bubbles are cities with the least zoning regulations. Light blue is moderately strict, and dark blue is very strict. The size of the bubbles depends on how much prices grew over the 20-year period. The larger the bubble, the more prices increased.
Look closely and see if you can determine a pattern. Notice anything? It’s a trick question—there is no discernable pattern here. Just because a city has strict zoning laws doesn’t mean price growth will outweigh a city with moderate zoning laws.
But you probably already know this inherently. Of course, there’s more to real estate appreciation than zoning laws. There needs to be strong demand as well.
I’ve already researched the main factors that are most correlated with price growth in a previous post on tech job growth, and the winners were household income, office employment, and total employment, depending on the market.
Final Thoughts
Just because a city is in a blue state with strict zoning laws doesn’t mean it’s going to appreciate more than a city in a red state with less strict zoning laws. It’s simply not true. Allow me to beat the point home with the following bar chart.
What does appear to be true is that strict zoning laws artificially limit supply, which can force prices up. But it also appears the variables influencing home price growth most are income and the number of new people who demand housing in an area. These “demand variables” just matter a bit more.
If you have any disagreements, post them in the comments. My only request: Just be civil.
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