Have you recently contemplated purchasing an old home, demolishing it, and replacing it with a new and larger home? Have you contemplated purchasing old, small apartments in an area with rapidly escalating prices and replacing them with condos more suitable to the land values in the area? If so, you may have a good idea of the restrictions that local governments place on such improvements in the housing stock.

In many metropolitan areas, restrictions are most stringent in the most desirable sections: the lakefront in Chicago, the Fairmont Park area in Philadelphia, Beacon Hill in Boston, Nob Hill in San Francisco, Midtown and Brooklyn Heights in New York, for example. The reason is that the desirable areas are home to the most affluent and influential people.

Influential property owners use many pretexts to persuade zoning authorities to limit densities in their neighborhoods, such as preserving traditional neighborhood ambience, sunlight access, and views, or reducing congestion. But their ritualistic arguments, unsupported by evidence or analysis, mask a more pecuniary motive.

The real reason behind restrictions on construction and density is the most obvious: Limiting housing supply raises prices, providing capital gains to owners, especially in desirable neighborhoods.

One effect of the resultant higher housing prices is that minorities and other moderate-income people find it harder to move into these neighborhoods. This racial exclusion effect has been a key issue since the early 1970s, after the 1960s’ open housing laws acquired bite, and sellers, real estate agents, and lenders risked civil and criminal prosecution for racial discrimination. Since private discrimination has become dangerous, the upper-middle classes have surrendered their Fifth Amendment rights to “just compensation” for public taking, in exchange for having local governments do their dirty work for them.

An excellent example is Lincoln Park, three miles north of Chicago’s city center, where I lived for about 12 years. From 1970 to 2000, down-zonings decreased the area’s population and reduced its black population from 7.3 to 5.7 percent of total population. During the same period, Lincoln Park income levels and housing prices rose from among the lowest to the highest in Chicago.

Courts have been willing accomplices of the local government takeover. On the mere assertion by a local government agency that the controls correct “nuisances” or “congestion,” courts accept the “neighborhood effects” constitutionality of almost any government controls that do not deprive owners of all uses of their property.

Other undesirable side effects of urban land-use controls are sprawl (excessive suburbanization) and traffic congestion. If developers are prohibited from building up as land values rise, they must build out to distant suburbs. The result is longer commuting distances to downtown jobs. Nearly all such commuting is by car, since controlled densities are so low that public transit can serve distant residents only at extortionate costs.

Of course a high-rise condo would be out of place in a suburban neighborhood filled with pristine, single-family homes on large lots. That is because a half-century of government controls has produced artificially homogenous neighborhoods with uniformly low densities. These excessive controls over much of the U.S. metropolitan suburban development should be loosened.

Fortunately, several measures could deliver benefits soon after being adopted, including permitting high-density developments near highway interchanges and commercial centers—which would also ease commutes—and banning further restrictions.

For many regions, my proposal is but a pipe dream that clashes with the psychological orientation of everyone who could influence housing policies. Where pretense and cognitive dissonance are less entrenched, however, I’m hopeful that people of influence will someday lead the way to help make homeownership in the most desirable areas a realistic American Dream.