November 2, 2026 10:49AM # Bank Regulation, Construction Financing, and the Supply of New Housing By [Jeffrey Miron](https://www.cato.org/people/jeffrey-miron) --- SHARE Listen to this article Generated with [ ElevenLabs](https://elevenlabs.io/) AI technology. Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech) AudioNative Player... [New research](https://www.cato.org/research-briefs-economic-policy/bank-regulation-construction-financing-supply-new-housing) about the effects of post-2008 bank regulation confirms [what I’ve argued](https://www.cato.org/commentary/financial-market-reform) since the financial crisis: increased bank regulation will often lead to more ills. The study looked at the effect of > two major regulatory changes that took effect in 2013: the phased implementation of Basel III capital requirements and stress tests required under the Dodd–Frank Act. … \[S\]ince construction loans are relatively risky and require substantial capital under these rules, the policies may have encouraged the largest banks to reduce this type of lending. The  > evidence suggests that the reforms disrupted banking relationships rather than simply reducing lending across the board. Among builders that had relationships with both types of banks, relationships with stress-tested banks were 12.4 percentage points more likely to end after the reforms than relationships with other banks. In addition, > \[g\]reater exposure to stress-tested banks was also associated with higher house prices. More-exposed counties experienced a 1.5 percent additional increase in house prices by 2017 relative to less-exposed counties in the same regional market. While > these policies may have strengthened the banking system, they constrained lending in markets that depend on local relationships and specialized knowledge. *Cross-posted from* [*Substack*](https://jeffreymiron.substack.com/p/immigration-restrictions-cause-enforcement)*.* ##### Related Tags [Affordability](https://www.cato.org/affordability), [Banking and Finance](https://www.cato.org/banking-finance), [Regulation](https://www.cato.org/regulatory-studies) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).