When Affordable Housing Meets Free-Market Fantasy

Updated: Sep 17, 2019

Policy wonks left and right have sought to blame the U.S. housing crisis on local zoning regulations. But the evidence tells a different story.

Why is housing in booming U.S. cities increasingly unaffordable to everyone but the wealthiest? In early September The New York Times published a provocative op-ed that answered this question from a market-oriented perspective. Drawing on their widely cited 2015 paper, “Why Do Cities Matter? Local Growth and Aggregate Growth,” urban economists Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of the University of California, Berkeley contended that “[s]ince the 1970s, a property-rights revolution—what critics call Nimbyism, from ‘not in my backyard’—has significantly reduced the development of new housing stock, especially in cities where the economy is strongest,” thereby driving prices up to their current astronomical levels. Moreover, by impeding worker mobility and recruitment, “too-stringent housing regulations in high-wage, high-productivity cities” have resulted in “slower economic growth, fewer jobs,” “lower wages across the nation,” and ultimately “forgone gross domestic product” of $1.4 trillion.

Hsieh and Moretti had reason to think that their op-ed would be well received. Since its publication two years ago, “Why Do Cities Matter?” has been routinely cited by influential purveyors of the market creed, including some with liberal credentials—among them the Obama White House, the California Legislative Analyst, Vox cofounder Matt Yglesias, and economist Paul Krugman. Two days before Hsieh and Moretti’s op-ed appeared, Krugman opined in his Timescolumn that “Nimbyism is bad for working families and the U.S. economy as a whole, strangling growth precisely where workers are most productive.”

Although they mention Boston, Seattle, San Francisco, and New York, Hsieh and Moretti home in on California and above all the Bay Area, where, thanks to challenges brought by “neighborhood groups,” the “main effect today” of the “well-intentioned” but ill-used California Environmental Quality Act (CEQA) is to “mak[e] urban housing more expensive.” The two economists applaud a controversial bill making its way through the California Legislature, SB 35, that “would significantly curtail municipalities’ ability to delay urban housing projects that meet certain planning and environmental standards.” With a closing nod to the “debate in Washington about the costs of regulations for economic growth,” they aver that the reformation of “[e]xclusionary land-use regulations in our most dynamic labor markets” would primarily benefit America’s middle class and thus deserves bipartisan support.

Read entire article HERE.

"When Affordable Housing Meets Free-Market Fantasy"; By Zelda Bronstein; Dissent Magazine; November 27, 2017

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