Economists have been growing increasingly concerned that restrictive urban land-use regulations, engineered by a strange alliance between environmentalists, wealthy NIMBYs and grassroots left-wing activists, are driving up rents and choking job-creation by making the workforce less mobile.
And new report from the real estate database Zillow suggests that they are right to worry: Since 2011, cities with onerous zoning laws have experienced much steeper rent increases than their less-regulated counterparts:
[O]ver the past five years the typical rent in the highly regulated city of San Francisco increased 42.4 percent. In more laissez-faire Chicago, median rent increased just 7 percent over the same period. On average, rents in the nation’s least restrictive cities rose 6.1 percent over the past five years, while rents in the most restrictive cities rose 16.7 percent. And while land use regulations are not the whole story, they certainly contribute.
Excessive zoning has a number of insidious effects, even beyond dampening economic growth and biting deep into workers’ paychecks. First, it tends to drive up economic inequality: The (disproportionately white and wealthy) people who already own real estate in highly regulated areas see their property values appreciate, while striving poor and middle-class people are shut out of the market entirely. In that sense, zoning might be added to Jonathan Rothwell’s list of ways that “politicians and intellectuals often champion market competition among low-paid service workers” while allowing “elite professionals [to] sit behind a protectionist wall.”
Soaring rents also have undesirable demographic effects: They drive middle class families (generally a moderating force in city politics) out of urban areas, and make it difficult for young people not in fields like finance, tech, or consulting to get a footing in the housing market—a critical step toward achieving adulthood. Getting rents under control should be a major priority for any reform-minded politician—Left or Right—who wants to prioritize fairness, growth, and political stability. And that means beating back corrupt and outdated building restrictions.