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NOAH_BLOOMING
November 8, 2021
Noah Smith in his piece "Your Landlord Is a
Drag on Growth" from Bloomberg, Dec 4, 2015,
argues for relaxing building restrictions
to increase the housing supply (and bring
rents down).
He paints a portrait of evil entrenched landlords
hi-jacking the political process at the expense
of people who rent from them...
My response was:
"Land use restrictions in San Francisco are actually popular
with the citizenry at large: when they come up for a vote
(we do direct democracy out here, remember) the voters tend
to say 'please don't build that crap'. There may indeed be
some rent-seeking buried in this behavior, but there are
many other things like a desire to preserve the character of
the place, and a fear (born of experience) that any new
project is going to turn out to be complete garbage (the
United States appears to have lost the ability to build
anything worthwhile after WWII). But economists don't like
to think about things like this, because they don't fit into
their simple 'supply-and-demand' narratives. Someone should
invent a name for that, like 'Econ 101-ism'."
ECON-101ISM
Noah Smith sites one source, but then veers off into flat
assertions, and his language keeps getting tentative, he
hasn't really established that the story he's telling is
true, just that it's plausible:
"... U.S. Jason Furman, the chairman of the Council of
Economic Advisers, gave a recent speech to the Urban
Institute ... He noted that Americans are moving much
less than they used to, and are also switching jobs
less frequently."
"According to Furman, some of the change may be due to
more zoning. Since the late 1970s, land-use regulation
has skyrocketed in the U.S. That has caused housing
prices to go up at a much faster rate than construction
costs-- something sure to please existing homeowners,
but which locks potential homeowners out of the
market. The more zoned a city is, the less affordable
it tends to be."
You might wonder if the cause-and-effect works the other way.
The more over-heated a local real estate market is, the more
voters favor putting some brakes on the construction process.
Lack of affordability doesn’t just create inequality
among individuals, it creates inequality across
regions. Furman shows that states with more constrained
housing supply have seen much slower income convergence
between different cities.
Once again, correlation isn't causation... if I'm
successfully untangling Noah Smith's language
here, he's saying places with lots of economic
activity have higher inequality....
I like this bit:
Of course, this is in addition to the other problems that zoning
causes, such as the environmental costs of sprawl, the potential
exacerbation of housing bubbles, and the productivity drag from
reduced density.
If you're worried about the low density of that sprawl, shouldn't
you be looking at the land-use restrictions *in those places*?
Instead, everyone discussing these issues keeps veering back to
the big name sexy places like New York and San Francisco.
Is it because they're willing to
live there and don't like to think (Noah Smith *must* know what it's like
about a life in the burbs? out there, he's an Associate Prof at
Stony Brook. Commuting from NYC to Stony
Brook is a near impossibility, you'd be
looking at something like a two-hour trip
each way.)
"The new spotlight on zoning is causing
even traditional proponents of government
intervention to call for regulatory
reform. Paul Krugman notes that the recent
influx of wealthy people into big cities
means that we need to deregulate land use
and increase the stock of housing:"
'[T]his is an issue on which you don’t have to be a
conservative to believe that we have too much
regulation. ... New York City can’t do much if anything
about soaring inequality of incomes, but it could do a
lot to increase the supply of housing, and thereby
ensure that the inward migration of the elite doesn’t
drive out everyone else.' "
Fish Heads comments:
"Noah has to be writing about high density places like NYC, San
Francisco, and DC. In most places, zoning regs serve many
purposes outside of the issues he is addressing. Imagine getting
a shiny new grease rendering plant or feedlot just upwind of
your neighborhood? Or a strip club next to your church? The
comment section on Justin Fox's article he references showed a
high level if nimbyism. Land use issues get tricky. Traffic,
zoning and infrastructure the big drivers of land use."
ValueInvest comments:
"Just another economist sticking to the good light
under this lamppost? Let's wander a little further LAMPPOST
out beyond a narrow focus on economic analysis of
the first factoid that comes to your attention."
PostmanSays commented:
"In a very broad sense, rapid change is often good
for society and the country, yet often very bad for
individuals. That is certainly the case here. DRAG
Millions of homeowners depend on zoning laws to slow
down change in their neighborhood, partly because
the character of the neighborhood is what they chose
and became comfortable with, and partly as their
most important financial investment; a decision
which lowers the value of a mostly paid off home, in
effect, discounts all the work those homeowners did
during their lifetime. If citizens have any right
whatsoever to pursue their own best interests
through the political process, certainly it applies
in this area."
David Brown comments:
"Why can't you develop in the leafy confines of Greenwich
Village in NYC? It is not the landlords, who have strong
economic self- interest in more intense development, it is
the existing tenants who don't want their good life
distrurbed (and there are a lot more voting tenants than
voting landlords)."
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