Reforming land use regulations

The Brookings Institution reports:

Arguably, land use controls have a more widespread impact on the lives of ordinary Americans than any other regulation. These controls, typically imposed by localities, make housing more expensive and restrict the growth of America’s most successful metropolitan areas. These regulations have accreted over time with virtually no cost-benefit analysis. Restricting growth is often locally popular. Promoting affordability is hardly a financially attractive aim for someone who owns a home. Yet the maze of local land use controls imposes costs on outsiders, and on the American economy as a whole.

New York City enacted its pioneering zoning code in 1916. The Supreme Court only established the constitutionality of Euclidean zoning, which restricts neighborhoods to single uses, in 1926. Yet, these restrictions didn’t meaningfully prevent new building in much of America until the 1970s. Abundant new construction, not just in Texas but also in New York, Los Angeles and greater San Francisco, ensured that as late as 1970, prices remained close to the physical costs of construction in much of America.


Yet starting in the 1960s, a property rights revolution occurred in the U.S. Backed by environmentalist rhetoric in the suburbs and preservationist priorities in the cities, American localities increasingly restricted the rights of property owners to build. We changed from a country in which landowners had relatively unfettered freedom to add density to a country in which veto rights over new projects are shared by a dizzying array of abutters and stakeholders. Consequently, we now build far less in the most successful, best educated parts of the country, and housing prices in these areas are far higher than construction costs or prices elsewhere.

Professor Glaeser explains why a free market in real estate is better than what we have know.