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Seattle has decided to be a last-minute entrant into the competition for Amazon’s HQ2. But while most cities — such as Boston and Washington — are trying to land the retailing giant’s second headquarters, Seattle is doing its best to make Amazon reconsider the importance of its current home base. The company “will continue to evaluate its long-term plans for Seattle after the City Council passed a bill to tax large businesses to fund homelessness services,” according to the Seattle Times. Recall that when a larger tax was being considered, Amazon had halted planning one new office building and was considering subleasing the office space on another that’s under construction.
Look, Amazon has a legitimate reason to feel like it’s being scapegoated for the proper working of the laws of supply and demand. Seattle has some of the strictest land-use regulations in the nation. NIMBY alert! As a long Politico Magazine feature detailed last month, local residents don’t want to change zoning laws to allow new development. Over half the city’s land is zoned for single-family homes, when what’s really needed is more density — more town homes, apartment complexes, and other multifamily housing types.
Some numbers, courtesy of Politico and the Seattle Times: Since the end of the Financial Crisis, Seattle has added 100,00 new jobs, but only 32,000 new homes and apartment units. In the typical year over the last two decades, King County (home to Seattle) had one home for sale for every 230 people. Now? There’s one home available for every 1,060 people.
But it’s not just Seattle. The US has a macro problem with housing affordability in some of its highest productivity cities. Research by Chang-Tai Hsieh and Enrico Moretti finds that the “creeping web of these regulations has smothered wage and gross domestic product growth in American cities by a stunning 50 percent over the past 50 years.” And it’s not getting better. Just recently, a California bill to allow more housing density died in the legislature. The Amazon-Seattle dispute seems to be getting more press attention than that conflict, which is good; the issue needs a big spotlight to help spur action. Check out this snippet from a recent podcast Q&A I recorded with Obama White House economist Jason Furman:
Pethokoukis: If you wanted to boost productivity growth, we mentioned a little bit about investment, but are there any other policies that people aren’t nationally thinking of which have been hurting growth or depressing growth in recent years? Housing maybe and land-use regulation? I know it’s something you’ve written about.
Furman: Housing and land-use regulation. You can answer all the questions for me. I think there is a lot of evidence that where people are matters for productivity and having conglomerations of people in the most productive areas is great for the economy. And right now a lot of people can’t afford to live in those areas so I do think knocking down those land-use regulations would help. And the other one is occupational licensing which prevents a lot of people from moving between occupations and also prevents them from moving across state lines. Non-compete agreements, I would throw that in as well.
Pethokoukis: What can the federal government do about that other than talk about it?
Furman: I think one thing that the federal government can do which I certainly tried to do at CEA is use the bully pulpit to educate. We used to talk to governors and mayors about those issues. When I was in the White House we put out a template for what you could do to deal with it. I think there is some federal money that could be created as an incentive to deal with those issues and as a penalty we could withdraw those funds if you don’t deal with those issues. Do we want to have some federal reciprocity for licenses? I think that’s something we should be thinking about. The FTC can do greater enforcement on the antitrust violation aspects with occupational licensing. But look a lot of this is if San Francisco wants to have really stupid rules that benefits the people that own housing there already and hurt everyone else and hurt the economy in the process, I don’t know if at the end of the day we can do something about that federally.