New homes are built by developers in response to this increase in demand. Restrictions on building during an expansion will result in a deliberate shortage of housing and will do nothing to solve regional problems. Policies that reduce the housing supply simply do not address the quality of life concerns that are purported to be the major issues. Growth controls are offered as a blanket solution for such diverse issues as traffic, inadequate sewage facilities, overcrowding of all types, the deterioration of air quality, and the loss of open spaces. In fact, growth controls can increase all of these problems if development shifts out from the controlled area.
Traffic provides a good illustration.
If roads were operated in private competitive markets, drivers would pay some price for the service. This price would reflect the demand for road use so that it would be highest during prime driving times. The prices would give drivers and firms the incentive to spread driving out across the day, reducing traffic congestion. Rather than focusing directly on the traffic problem with incentives, however, many metropolitan areas are proposing growth controls as the solution. When a city restricts housing development it causes developers to build on unregulated land on the urban fringe.