Zoning restrictions are driving up housing costs. They are preventing some people from moving from economically depressed areas with few jobs to prosperous areas where they could find a job, because there is no place they can afford to live there. That’s a reality discussed by Harvard economist Edward Glaeser in a recent City Journal article. He describes how the problem has become worse in the last 15 years. Due to problems like this, a broad consensus of economist and land-use experts agree that zoning restrictions on housing construction are harmful, and need to be trimmed.
Glaeser writes:
The overregulation of American housing markets began in the nation’s coastal, educated, productive enclaves. Over time, however, barriers to building have spread. Tony suburbs of Phoenix and Austin, which once left their builders free to construct plentiful affordable housing, have now become almost as restrictive as the Boston area.
The expansion of land-use regulations will have an enduring impact on the cost of American housing. The web of restrictions pushes prices up by limiting the number of houses that can be built and deters development through the uncertainty that it creates. Since the permitting process often allows only tiny one-off projects, American builders can’t exploit the economies of scale that have made almost every other manufactured good far more affordable.
The consequences of land-use regulations go beyond high housing costs. Since people can’t afford to move into areas that don’t build, America’s most productive places have remained too small. The nation’s gross domestic product is therefore lower than it could be with a more rational housing system, and poverty too often gets frozen. Housing-price bubbles are more extreme when the housing stock is fixed, too, so the country courts financial chaos by refusing to make building easier…
While the coasts were the initial epicenters of overregulation, 61 percent of the non-coastal West and 53 percent of the non-coastal East became substantially more regulated between 2006 and 2018. By contrast, 34 percent of the non-coastal East and 28 percent of the non-coastal West reduced regulation; 52 percent of the Sunbelt became more regulated, and 33 percent less regulated……
Across the country, the biggest regulatory changes were seen in minimum lot sizes and the number of entities required to approve any rezoning. In 2006, 28 percent of communities had a minimum lot size of one acre. By 2018, 39 percent of communities in the sample had a minimum lot size greater than one acre. The share of communities where a rezoning required approval by at least three entities went from 22 percent to 45 percent.
This creep of regulation means that restrictive zoning is no longer just a problem for New York and San Francisco. Regulatory curbs on new building are now part of life around much of the United States, and that has pernicious effects that go far beyond just pushing up prices….
This closing of the metropolitan frontier has macroeconomic implications. Again, restricting the supply of something that is in demand will make asset bubbles far more likely—and these, if large enough, can have a massive destructive impact when they burst, as they did in 2007…..
The second macroeconomic point is that restricting housing growth means limiting the movement of poor people to rich, productive places. Throughout our history, Americans have moved in search of economic opportunity….. That process of relocation has slowed greatly because poor people cannot buy or rent homes in the prosperous areas of technological progress, such as Silicon Valley…
Local land-use regulations also make America more unequal. My colleague Raj Chetty and his coauthors have produced an “opportunity atlas” that shows where poor Americans have the best chances of growing up to be successful. Their primary measure of opportunity is the adult income of children whose parents were poorer than three-fourths of their contemporaries at the time when the child was born…. [L]and-use regulations are strictest in areas that offer poor children the most economic opportunity.
Economists support getting rid of many zoning regulations. As Law Professor Ilya Somin observes,
The case for cutting back on zoning restrictions unites economists and housing policy experts across the political spectrum. That includes both pro-free market experts and prominent left-liberals such as Nobel Prize-winning economist Paul Krugman…and Jason Furman, Chair of President Obama’s Council of Economic Advisers.
Japan is very densely populated and poorer than the United States. It has three times as many people as California, but less space. But even in Japan’s capital Tokyo—the center of the world’s most populous metropolitan area—people are able to afford housing. Why? Fewer zoning restrictions.
As Nolan Gray notes at Market Urbanism:
Japanese zoning is relatively liberal, with few bulk and density controls, limited use segregation, and no regulatory distinction between apartments and single-family homes. Most development in Japan happens “as-of-right,” meaning that securing permits doesn’t require a lengthy review process. Taken as a whole, Japan’s zoning system makes it easy to build walkable, mixed-use neighborhoods, which is why cities like Tokyo are among the most affordable in the developed world.
As the Wall Street Journal notes, although housing has gotten much more expensive in 32 major cities across the globe,
one major city has had stable housing prices as a result of pumping out housing supply to keep up with rising demand. Tokyo is one of the few cities in which supply has kept up with demand, keeping a crisis from developing. But that is due largely to deregulated housing policies that other countries would have a hard time reproducing.
As another article in the Journal notes,
In the past two decades, home prices in some leading North American and European cities have skyrocketed. In Tokyo, however, they’ve flatlined. So why no affordable-housing crisis in Japan? A big factor, experts say, is the country’s relatively deregulated housing policies, which have allowed housing supply to keep up with demand in the 21st century. With no rent controls and fewer restrictions on height and density, Tokyo appears to be a city where the market is under control—where supply is keeping home prices from rising as drastically as they have in many other major world cities.….The Japanese government began relaxing regulations that had restricted supply, allowing taller and denser buildings in Japan’s capital. Private consultants were given permission to issue building permits to speed up construction.
