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Two economists at Michigan had this question: in what cities do home prices exceed the costs of the land and its construction costs? 

For some cities, like New York surprisingly, the land costs and construction cost move in line. But for cities like San Francisco and Los Angeles, accounting for land and construction did not explain why these homes were so expensive.

What do they think is the third cost to building a home? Regulation.

(HT to Storyline for the interesting article.)