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Anti-growth Housing Policy May Have Seriously Damaged the US Economy for Decades
In a dynamic economy, finance, ideas, people, and other resources flow to their most productive use. It’s an economy of constant disruption and change. Companies rise and fall, begin and end. Workers change jobs, moving if they must. Social mobility is high, and hopefully income growth, too. Misallocation of resources is the enemy of growth and opportunity.
But in his new book, “The Complacent Class,” Tyler Cowen describes modern America as a society that is “more risk averse and more set in our ways, more segregated … sapped … of the pioneer spirit that made America the most productive and innovative economy in the world.”
One cause of this dynamism decline, Cowen argues, is that it’s so darn expensive for workers to move to dynamic, high-productivity cities. In making this case, he cites the research of UC Berkeley economist Enrico Moretti who, as it happens, just released a new paper on the subject with Chang-Tai Hsieh of the University of Chicago. The researchers look at the “spatial misallocation of labor.” The problem here is that strict restrictions to new housing supply — local residents have a huge incentive here — have effectively limited the number of workers who can access high productivity cities and regions such as New York and the San Francisco Bay area.
The shock finding: Labor misallocation from housing constraints “lowered aggregate US growth by more than 50% from 1964 to 2009.”
Of course, a perfectly dynamic economy is impossible, but the research does suggest a potentially high level of self-harm from bad governance. Two possible solutions are offered. First, copy other countries by having federal and state governments “constrain U.S. municipalities’ ability to set land use regulations.” The 2016 Obama budget contained $300 million in funding for grants “designed to provide an incentive to encourage more relaxed land use regulations and increase the overall supply of housing,” as described by the CEA.
A second idea: Vastly improve public transportation. The paper notes how a “vast network of trains and buses allows residents of many cities in southern England … to commute to high [innovation] employers located in downtown London.” This doesn’t mean building a hyperloop necessarily (as awesome as that would be). It could mean express buses.
There is a counterargument here, that high costs in key coastal cities can result in a broader dispersion of talent. Let me also point to my podcast earlier this year when Joel Kotkin expressed deep skepticism on land use deregulation: “You’re never going to change the San Francisco situation in terms of affordability by having more density. Density is very expensive to build, and it isn’t what people want. ”
Published in Culture, Economics
How is this different that small municipality zoning regs?
They still can’t do whatever they want with the land… and if someone buys the land knowing the zoning rules and buys it anyway… or the deed rules…
How is the new owner using the land the way he wants if deed rules are attached to titles?
Again, isn’t someone kind of foolish if they choose to buy land they can’t do what they want with?
First, it’s about consent. Instead of letting politicians elected by the majority of the municipal voters, which as been mentioned can be a tiny percentage of the affected population, force changes that may affect property values, the owners of the property get to make that decision.
Second, it’s about stability. Municipal governments and the zoning rules they make can be easily gamed by large developers. Whether by buying politicians with campaign contributions or fraudulently moving people into fake addresses so they’ll vote for the zoning change, developers can, have, and will get the zoning they want. Anyone who trusts that zoning will protect the small landowners is a fool.
Land covenants bind not only the current owners, but also everyone to whom the land is sold, and just as importantly, they cannot be changed without the consent of every party to covenant. Thus future buyers know exactly what rights they’ll have in perpetuity, instead of taking the risk that their property rights can be infringed without any redress after the next city council elections.
This is why Houston survives and thrives without zoning. It’s not a land use free-for-all; rather than of a group of elites telling people what rights they’ll be allowed to have and free to change their mind at any time, the land owners have chosen how their property shall be used. The people who buy from those who established the covenants can be secure in the knowledge that the land use rules of the neighborhood cannot be changed without their permission, instead of being at the mercy of the transient majority.
We are citizens who have the right to make agreements among ourselves, not peasants who should have to petition the local lord for permission to use their own land.
Because if you’re not in SF you’re nowhere. If you’re the only Tech Genius in town, there’s no one to fix your Tesla. Clever food and craft beer? Maybe, but not in boundless profusion and iterations.
And the people! SF is enlightened. Out there, most everyone’s a hick. If they weren’t, they wouldn’t be there in the first place, living their dumb happy lives.
“No person shall…….. be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The Fifth Amendment.
Depriving one’s use of their private property has become standard operating procedure among many of city, county and state governments. The idea that we still live in a reasonably well functioning republic in many places is a delusion.
Most reasonably large cities in blue states are controlled by the public employee union. “Getting involved” is a dead end. These cities are not functioning democracies. They are governed by the union. Period. That is also California’s problem. The Public Employee Union controls the state.
Back in the day, zoning regulations made sense and were reasonable. In many places, the regulations have been used by the no growth environmental nutter cult to create impossible conditions for development driving housing costs impossibly high and strangling new business growth. We are way past the point where regulations are reasonable.
The standard comeback to the Fifth Amendments admonitions against takings is the “General Welfare Clause” which alleges that if a regulation promotes the general welfare that it can overrule someone’s property or other rights.
Fine.
If some municipality or other government entity wants to invoke the “General Welfare Clause” demand that they make a damn near beyond a reasonable doubt compelling case that their shiny new reg will actually promote the general welfare in all and I mean all respects. Economically, socially, culturally, etc. From all reasonable points of view. Otherwise, you have shredded yet again the Constitution, and descended into the rule by mob.
By the way, I doubt very much many of today’s regulatiosn could meet such a standard. In the end, most new regulations are fairy tale pipe dream fantasies cooked up by our Elitest betters to control us, keep us down, and don’t even come close to actually benefitting the general welfare in the end.
Really? One plan for the whole country sounds like central planning. I am surprised you would advocate something like that.