Governmental economists are concerned: incomes for the middle class aren’t rising, and inequality is. Land-use restrictions are at least partially to blame. On November 20, 2015, Jason Furman, Chairman of the White House Council of Economic Advisors, detailed the adverse consequences of land use restrictions to a housing conference and explained how they impede workforce mobility and productivity and contribute to inequality.
Zoning regulations that reduce the supply of housing allow for a small number of individuals to capture the economic benefits of already living in a certain community, while restricting opportunities for the majority of individuals by the artificial upward pressure that zoning places on housing prices.
Housing markets where supply cannot keep up with demand will see housing prices rise. Growth boundaries, minimum lot sizes, height limits, and prohibitions on multifamily housing all constrain supply. More intensive and restrictive zoning frequently occurs where the wealthy support exclusion and limitations placed on other development, feeding a cycle of restricted supply, higher prices and increased demand from upper market buyers.
One consequence is that the broad middle class has trouble seeking higher wages in booming cities due to the cost of housing. Middle-income families are priced out of communities with better quality schools and services. The most affluent households self-segregate within metropolitan areas under the guise of what may appear, at first glance, to be well-founded land use restrictions and policies.
Modifying land use regulations to accommodate a more flexible housing supply can interrupt the exclusionary zoning cycle and the exaggerated housing prices that result.
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