Housing costs holding back American economy: Harvard study

October 17, 2012 01:30PM

A massive hurdle to economic growth is income inequality, which is magnified by the disparate costs of housing in different regions of America, a new study from Harvard University said, according to the New York Times.

Wealth disparities hamper economic growth overall, the study says, per the Times, because low-skilled workers have been entirely pushed out of more expensive metropolitan areas where their skills are needed. Flexible workers who can follow demand are necessary for a healthy economy in this model.

“The best places for low- and high-skilled workers used to be the same places: California, Maryland, New York,” Peter Ganong, an author of the paper, told the Times. “Now low-skilled workers can no longer afford to move to the high-wage places.”

In order to spur the economy, locals governments ought to raise restrictions on residential development, in order to help ease housing demand in high-wage areas, such as New York City and Boston, the Times points out. Restrictive development policies are “generally embraced by the residents of wealthy areas, who benefit, at least in the short term, from restrictions on the supply of new housing,” the Times said. [NYT] — Guelda Voien