The Real Deal New York

Strict land-use requirements are tied to income gap between states: report

High housing prices in cities appear to slow economic mobility

October 19, 2016 01:21PM

Strict land-use requirements in major cities like New York City and San Francisco are keeping poorer workers out and causing economic segregation, a new study suggests.

Harvard University professor Daniel Shoag and Peter Ganong of the National Bureau of Economic Research looked at the effect of land-use regulations on the increasing inequality between poorer and richer states. Their research suggests that dramatically high prices and low housing supply in wealthy cities, which decreases economic mobility, is partly due to increasingly tough zoning laws.

Unskilled and lower-skilled workers are staying where they are because the increase in wages they would get in say, New York, doesn’t justify the increase in housing costs. Between 2000 and 2010, population in Alabama grew about 7 percent compared with 2 percent in New York.

“There are traditionally two ways to change your fate — get an education or move to a higher-wage part of the country,” Shoag told the Wall Street Journal. “The second channel isn’t really available because the prices make that a bad deal.”

For example, on average, a lawyer and janitor in New York in 2010 earned 45 percent and 32 percent more relative to Alabama, respectively. However, once you adjusted that for housing prices, they earn 35 percent and -6 percent, respectively.

The research suggests that the deceased mobility is linked to more stringent land-use rules in cities with the most demand for housing. Shoag and Ganong looked at mentions of the term “land-use” in appeals-court decisions and found that between 1950 and 2010, the share of cases with the term rose 265 percent in New York and 644 percent in California. In Alabama, it increased by 80 percent.

While land-use regulation is not the only factor contributing to constrained supply in cities, it certainly slows some kinds of development, the newspaper said.

New York City and San Francisco have seen significantly less residential development than cities like Atlanta and San Diego — and have seen prices rise commensurately — but it can be difficult to compare between cities because of geographic differences. In addition, many zoning laws are in place to ensure quality-of-life issues that are specific to high-density metropolitan areas.

“Most of those regulations aren’t just crazy,” Vishaan Chakrabarti, founder of the New York-based architecture firm Practice for Architecture & Urbanism, told the Journal, “They’re there to maintain a sense of identity that people care about.” [WSJ]Chava Gourarie