If a state wants funds for infrastructure, it should meet strict conditions about housing construction.
President Biden’s American Jobs infrastructure plan hopes to shake this country free of wasteful barriers to affordable housing — especially in booming areas.
An “innovative” competitive grant program will act to eliminate these harmful zoning and land-use practices. Mr. Biden has the right goal — reducing regulatory barriers on new construction could have wide-ranging economic benefits that exceed anything else in his $2 trillion plan. But a competitive grant program is too weak to overcome the entrenched interests — like the homeowners who control local zoning boards and the wealthy residents of cooperatives who oppose all neighborhood change — that limit building in productive places.
If the president wants to break the country out of its zoning straitjacket, the infrastructure plan should ensure that no benefits go to states that fail to make verifiable progress enabling housing construction in their high-wage, high-opportunity areas.
Over the past century, America’s local land use controls have come to shape the path of our entire economy. The economists Chang-Tai Hsieh and Enrico Moretti estimate that “stringent restrictions to new housing supply” have “lowered aggregate U.S. growth by 36 percent from 1964 to 2009” — which means that with fewer restrictions, in 2009, the economy would have grown at a “3.7 percent higher” clip and a typical American worker would have earned an additional $3,685. The federal government can affect these hyperlocal laws only indirectly by applying enormous economic pressure on state legislatures to limit the land-use powers wielded by local governments. By putting conditions on so much infrastructure aid, the Biden plan could offer a once-in-a-lifetime chance for states to make America more affordable and productive.
Americans have always been on the move: people seeking out areas of opportunity that made them, and our country, wealthier.
But since 1980, low-income Americans have too often stopped migrating to these places, partially because land-use controls have limited the supply of affordable housing. Joblessness has become endemic in parts of the American heartland, but how many jobless people can afford to leave Youngstown, Ohio, where the median home price in 2019 was about $103,000, to go to San Jose, Calif., where the median price was $1.265 million?
The reasons for coastal California’s high prices are not only robust demand for its climate and high wages. They also reflect the regulatory barriers that stymie housing supply. The Golden State had great weather and good jobs in 1970, but its median home price was only $158,000 (in 2021 dollars), lower than that of Connecticut or New Jersey. A flood of new construction held down California’s prices: Between 1950 and 1970, the housing stock there grew by 40 percent per decade. After 1970, the growth rate dropped in half, not because California lacks land but because the state imposed growth controls, environmental impact reviews and various land-use regulations.
Limits on new building have also sharply increased the cost of living in New York City, greater Boston and throughout America’s more prosperous places. These rules have also led to an intergenerational shift in housing wealth, enriching the baby boomers and leaving millennials with scraps.
The rules have also exacerbated the negative effects of fluctuations in the housing market. Before the 1980s, new construction during booms helped to dampen price swings. But as the supply of new buildings became more fixed, America’s housing bubbles have become more extreme and more catastrophic for the financial system.
The president wants his plan to prioritize and address “longstanding and persistent racial injustice,” but limiting density has long kept Black Americans out of leafier enclaves. The urban economist Matt Resseger finds that in Greater Boston, blocks that allow multifamily housing have more Black and Hispanic people than neighboring blocks zoned for single-family housing. The sociologist Douglas Massey finds the zoning that limits density also leads to greater segregation between rich and poor.
The current web of land-use restrictions will also stymie the president’s hope to achieve “net-zero emissions by 2050.” Household carbon emissions are much lower when we build in areas, like California, with moderate climates, yet those are the areas where land-use controls are the most extreme. Both household and travel-related carbon emissions decline when we build at greater densities. And regulations that limit new construction keep Americans living in older structures that typically use more energy.
Linking infrastructure spending to permitting new construction makes sense, because the benefits of infrastructure are higher when more people can locate near enough to use that infrastructure. President Biden wants to “expand transit and rail into new communities,” but that make senses only if those communities add enough housing so there are enough riders to cover the fixed costs of transit.
The plan’s goal is to invest about 1 percent of gross domestic product per year over eight years, so the regulation-related requirements imposed on states should become more stringent over time. Conditionality should start with an “affordability and construction standard” for America’s most productive counties, which can be defined as those whose output per capita, as measuredby the Bureau of Economic Analysis, is greater then three-quarters of all counties. There isn’t a problem if those productive counties are already affordable (perhaps with median prices below $350,000) or dense (perhaps having more than two houses per acre) or already supply significant amounts of new housing. But if a state has more than one or two productive counties that are expensive, not dense and failing to build, then it would have to take action to receive infrastructure funds.
In the first year, that action could just be a piece of legislation proposed by the governor. In the second year, the legislation would have to be enacted. After that point, conditionality would depend on significant new building in expensive, productive, low density areas.
America can become more productive, equitable and greener if we free ourselves from the land use controls that limit opportunity. President Biden’s infrastructure plan can push state legislators to give landowners more rights to build. The key is for infrastructure dollars to only flow to states that make progress fighting the scourge of regressive, repressive zoning.
This piece originally appeared at The New York Times (paywall)
Edward L. Glaeser is the Glimp professor of economics at Harvard University, a senior fellow at the Manhattan Institute, and contributing editor at City Journal.
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