By almost every metric, people are better off today than they were at the beginning of the decade just ended. Median household incomes reached all-time highs; global life expectancy increased, and infant mortality plummeted. Affordable housing in America, however, remains scarce—largely because of local-government zoning restrictions, as documented in a new working paper for the National Bureau of Economic Research that I coauthored with Wharton economists Joseph Gyourko and Jacob Krimmel.
We based our findings on a 2018 survey of zoning and land-use restrictions in more than 2,400 municipalities. It appears that zoning regulations remain nearly as restrictive in most municipalities as they were before the Great Recession—and even more so, in some coastal markets like San Francisco and New York. Long-standing zoning measures have prevented expanding the supply of affordable housing that would otherwise increase in a free market. Home prices have spiked upward, shutting out scores of people from desirable regions.
These trends affect labor markets, too. Over the past ten years, many have found it too expensive to relocate to hubs like the Bay Area, where job openings abound but housing remains costly. In San Francisco, for example, zoning laws prohibit buildings taller than four floors in most neighborhoods, resulting in virtually zero net population growth and limited migration of less wealthy individuals seeking opportunity.
Democratic presidential candidates have ignored zoning in their debates about economic inequality. Left-leaning candidates like Senator Elizabeth Warren target the tax system but ignore the larger issue of local housing regulations that block new construction. The instinct often involves self-interest: even progressives like author Margaret Atwood oppose constructing more lower-income housing units, presumably because they want to protect their home values.
Scholars like Northwestern economist Matt Rognlie note how onerous government-zoning laws have contributed to a decades-long pattern of increasing wealth inequality. Reducing zoning regulations is crucial to improving economic mobility, which would help reduce inequality. Expanding economic freedom in this way is a politically winning cause for the Left and Right. As we enter a new decade, a diverse movement that transcends ideological categories has been working to open up zoning, shorten approval times for new housing construction, and streamline the bureaucratic process. If these efforts prove successful, freer markets will eventually yield more affordable housing.
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