overregulated
Zoned Out

If there’s one thing America’s anti-establishment populists from both parties agree on, it’s that the American upper and upper-middle classes have rigged the political and economic system so as to favor themselves and their children at the expense of the vast working class. The populist Right frames this problem in terms of immigration and trade, and the populist Left focuses on taxes and redistribution. And while both approaches have some amount of merit, it’s difficult to think of a clearer example of elite self-dealing than U.S. housing policy over the last several decades. Over at Brookings, Richard Reeves and Dimitrios Halikias discuss academic research showing the steady increase in land-use regulations, which have the effect of inflating the real estate values in wealthy communities while making it steadily more difficult for upwardly mobile people without means to share in that prosperity:

Social mobility and geographical mobility have historically gone hand-in-hand in America: people move to places with greater opportunity. But such moves have become steadily more difficult, in part because of the growing regulation of land use. Zoning ordinances that limit density are a particular problem, reducing the availability of affordable housing. […]

NIMBYism is motivated by a rational desire to accumulate financial capital by enhancing home values. But for parents, it is also about helping their children accumulate human capital by controlling access to local schools.

As we’ve noted before in the context of Palo Alto’s widely publicized housing crisis, there are deep structural obstacles to solving this problem. Land-use commissions in upper-middle class communities have no incentive to take the interests of non-residents into account when formulating housing policy. And as their property values climb to new heights, they seem to become ever-more resistant to any regulatory loosening that might slow that growth down in the short term.

Other countries have addressed NIMBYism, in part, by disallowing municipalities from designing zoning policy exclusively around the interests of their wealthiest residents. Ontario has a housing board with the authority to knock down some arbitrary local regulations on construction. And as Alex Tabarrok recently pointed out, Japan’s national constitution protects strong property rights, which has led to a more laissez-faire land use policy and slower inflation in rents and home values. Some U.S. states are attempting comparable approaches: California is considering a bill that would curb the power of local governments to block development projects, and as the Brookings post points out, “two separate bills in the Massachusetts state legislature…would have required towns to create more multi-family zoning districts,” though neither one passed.

Land-use regulation ought to be a no-brainer for both parties. For Democrats, it is a clear example of structural obstacles to upward mobility for the poor and less-skilled. For Republicans, it is an example of overweening government regulation blocking economic growth. And yet, neither party so much as addressed this issue in their 2016 platforms—a testament to the power of the elite interests who will fight to keep their crony-capitalist system firmly in place.

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