Saturday, November 21, 2015

WSJ: Why White House Economists Worry About Land-Use Regulations

From the Wall Street Journal:

White House economic advisers have produced a steady diet of white papers this year to spotlight the puzzle of sluggish productivity, which economists want a better handle on because it helps explain why incomes for the broad middle class aren’t rising. Their latest target: land-use restrictions.

Housing is growing less affordable because there’s more demand for rental and, increasingly, owner-occupied housing, but little new supply. This hasn’t been a problem until recently—there’s been a considerable backlog of foreclosures and other vacant homes following last decade’s property bust. Throughout the housing slump, policy makers have focused on boosting demand by keeping mortgage rates low and expanding access to credit.

Now, there’s growing attention on what’s happening on the supply side. Some cities face supply constraints beyond their control. Coastal cities often see much pricier housing—and considerable price volatility—because there aren’t too many places left to build.

But other cities make things worse with zoning and other land-use restrictions that discourage production, said Jason Furman, chairman of the White House Council of Economic Advisers, in a speech Friday at a housing conference co-hosted byCoreLogic, a data company, and the Urban Institute, a think tank.

“Artificial constraints” on housing supply hinders mobility, and increasing mobility “is going to be an important part of the solution of increasing incomes and increasing incomes across generations,” Mr. Furman said. Zoning rules, of course, aren’t distributed randomly across the country, which means they’re “actually correlated with those places that have higher inequality,” he said.

This feeds a cycle in which cities that have more restrictions on land use have higher inequality, which further constrains mobility, which further exacerbates inequality, and so on.

Read the rest here.

https://lawprofessors.typepad.com/land_use/2015/11/wsj-why-white-house-economists-worry-about-land-use-regulations.html

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