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Local Control Gone Wrong

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Local Control Gone Wrong

Inflated housing costs impose hidden costs on Cambridge, Massachusetts, and other hubs of American innovation. May 12, 2021
Technology and Innovation
Economy, finance, and budgets
Politics and law

Moderna’s Covid-19 vaccine has been lauded as a triumph of American industry, but it’s a triumph of one corner of American industry in particular. Moderna is one of a cluster of biotechnology startups in Kendall Square, a neighborhood of Cambridge, Massachusetts, just east of MIT and a few minutes by subway from Harvard and downtown Boston. Spillovers from research at the city’s hospitals and universities, combined with generous state- and university-supported startup incubators, have fostered what some reporters call the “most innovative square mile in America.” And Kendall Square is but one part of a much broader Boston biotechnology ecosystem.

Kendall Square’s location in Cambridge, though, is in many ways a misfortune. The biotech industry depends on geographical concentrations of highly skilled researchers and specialized facilities, as well as collaboration with immobile institutions such as universities, leaving it captive to the expensive Boston-area housing market. Cambridge, in particular, is extremely pricy, with an average home value of $900,000—nearly twice what it was ten years ago—according to data from the real estate information company Zillow.

The reason for the massive cost escalation is simple: a well-financed biotech industry has collided with an inflexible housing market. Almost half of Cambridge’s housing stock was built before 1940; a time-traveler from the postwar period would find most of the city’s appearance virtually unchanged. And the lack of new housing has put a severe cramp on the city’s expansion: despite some population growth over the past decade—accommodated largely by rampant housing overcrowding, even among highly educated workers—Cambridge is still slightly below its population in 1950, when it was a working-class city with a below-average median income. Housing prices aren’t the only drag on the area’s biotech sector: laboratory space for biotech startups, which can be built only in the city’s comparatively small portion of nonresidential land, have also seen massive price increases.

As in many other high-cost blue cities, the housing shortage in Cambridge was engineered by an entrenched cohort of wealthy, politically influential long-time homeowners who see no contradiction between progressive political ideals and reflexive opposition to letting anything in their neighborhood change. In Harvard Square, for instance—a neighborhood with excellent transit access, in which skyrocketing commercial rents have repeatedly forced popular businesses to close—the Cambridge Historical Commission and the Harvard Square Neighborhood Association caused substantial delays to a plan to renovate a closed movie theater for more commercial space. Among the reasons: the head of the Harvard Square Neighborhood Association, a longtime Harvard art and architecture professor, complained that renovations would add 14 feet to the building’s height; the Cambridge Historical Commission objected that an LED display on the building might be “on the spectrum of Times Square.”

In 2019, similarly, the Cambridge chapter of Our Revolution, an activist organization spun out of the Bernie Sanders 2016 campaign, supported a slate of candidates for city council opposing a zoning change that would have allowed more housing construction—even though all new housing allowed by the zoning change would have to be “100% affordable,” rented entirely at below-market rates. Another zoning change currently under consideration—designating an unremarkable swath of East Cambridge adjacent to Kendall Square as a historic district—seems specifically targeted at stopping the biotech industry from expanding.

Cambridge biotech firms have to pay employees far more than they would earn elsewhere just so they can afford housing, or to compensate for enduring the area’s overcrowding. This business tax, in effect, inflates the home values of long-time residents, who thereby leech off of a productive industry. Small startups pursuing innovative, uncertain ideas are the firms most affected by Cambridge’s inflated real-estate prices—and the high cost of living in Cambridge has doubtless killed off many medical innovations by convincing prospective founders that a longshot research idea was unlikely to pay off, or by making it too expensive for startups to expand.

Cambridge’s example shows the limits of defending zoning as simply an outgrowth of principles of federalism or local control. Zoning policies are far from merely local concerns; they can have broader influence. Imagining how many patients could have been treated by medical innovations that Cambridge’s zoning policy effectively stopped is a sobering exercise. Defending local control in this instance means accepting these losses as a fair price for protecting a few thousand wealthy homeowners from the indignity of living near tall buildings.

Alas, Cambridge is not unique. America is filled with world-leading high-productivity industries—software development in San Francisco and Seattle, for instance, or entertainment in New York and Los Angeles—stuck in areas where zoning policies are a drag on their growth and output. Policies to reduce housing costs over homeowner cartels’ objections—including state preemptions of local zoning policy, which several states have recently passed—could turbocharge American innovation.

Photo by Dina Rudick/The Boston Globe via Getty Images

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