01:00 AM EST on Thursday, February 23, 2006

BOSTON

FROM colonial times, real estate has been the best investment an American could make. The long-term trend is that prices rise both gradually and in quick bursts, then level off, before beginning to rise again. Rarely in 375 years have they fallen for long. The last time they did was during the Depression, when values did not return to their 1930 level until after World War II.

The current 25-year trend in Massachusetts could be called a hyper-inflation. Within Route 128, there are plenty of homes that sold for $25,000 in 1980 that are worth $500,000 today. Beyond Route 128, and in "exurbia" beyond Route 495, the rise in values is, if anything, greater than in the "Hub." On Cape Cod, it is even greater than that.

A strong economy and Baby Boomers' buying homes have underlain this market. It has also been abetted by two political acts: The passage of Proposition 2 1/2, capping real-estate taxes, in 1980, made real estate a more attractive investment than it had been in the 1970s. Secondly, the ending of rent control in Boston, Brookline and Cambridge, in 1994, caused values and investment to soar; and the feverish activity in these communities pushed values up in neighboring communities. It also revealed the untapped potential value in rundown property in other cities.

In the beginning there was plenty of land. If Roger Williams offended John Winthrop with his radical religious beliefs, he had no trouble having some Indian friends smuggle him to a spot he would proclaim to be Providence. Other early settlers marched 100 miles west and founded Deerfield, in what is still called the Pioneer Valley.

Today, however, southern New England confronts a hard geographic fact: We are like Denmark or Japan, in that land is a limited resource. In built-up eastern Massachusetts, zoning, environmental regulations and green-space set-asides further reduce the availability of new building lots. During the last 10 years, the trend has been to squeeze out all but the high end of the market.

That has created a human problem for municipal workers, young couples and many others; and it has created an economic problem for the commonwealth: The cost of housing threatens to drive companies offering good jobs to look to states such as Georgia and North Carolina, where new single-family homes can still be had for under $150,000.

The former venture capitalist Mitt Romney has understood this problem well, and nothing becomes his gubernatorial tenure better than his effort to encourage new housing in existing downtowns and around transit stations. Housing starts are not up enough to palpably affect the market, but they are up, and that's a beginning.

Suburbanites generally aren't aware of it, but radical ideas are being floated to deal with high housing costs. There are those who would like to completely do away with local lot-size zoning, and with the local approval of building permits. There are even those who would like to do away with local government, which is seen as narrow-minded and exclusivist, in favor of a metropolitan form of government.

Such thinking misses that local self-government is what distinguishes New England from the remote, impersonal and frequently corrupt horrors of county government, as it is practiced in most of the rest of the country. But the world looks very different to people who live in cities where crime is high, and where decent, affordable housing is confined to the rich and a lottery-winning fraction of the poor. From that perspective, the spectacle of suburban mansions going up on lots the size of football fields is a social injustice. Author Jonathan Kozol has used the word apartheid.

The Pioneer Institute, a Boston think tank, is promoting less radical proposals to help increase the supply of housing in the state. These would create three new exemptions to Chapter 40-A, the state law authorizing local zoning.

The first would affect accessory or "mother-in-law" apartments, which would be convertible to affordable apartments. (Currently, the kitchen must be removed if Mother moves on.) The second would authorize the construction of apartments above commercial space in business districts. The third would allow cluster-zoning plans, in which conservation restrictions are exchanged for somewhat higher density, on as few as five acres.

In all three cases, communities would lose their power to block construction. But they would remain the permitting entity of first resort.

On Beacon Hill, the devil is always in the details of legislation. But these proposals seem well-thought-out, rational new steps to deal with the housing crunch. Communities would be well advised to look favorably on them, lest they face angrier, more radical ideas later on.

David A. Mittell Jr. is a member of The Journal's editorial board.