Great Antidote Extras: Emily Hamilton on Housing Deregulation

Kevin Lavery for AdamSmithWorks

NIMBYs, YIMBYs, and more in Lavery's Great Antidoe Extra on Emily Hamilton's episode on US housing and land use regulations.

Why is American housing so expensive? Do zoning laws prevent gentrification? Do housing regulations protect the environment? Emily Hamilton joins The Great Antidote host Juliette Sellgren to discuss how zoning laws harm economic growth, the importance of freedom of location, and the economics of housing deregulation. Emily Hamilton is a senior research fellow and the director of the Urbanity Project at the Mercatus Center at George Mason University. Listen to the episode here.

The cost of American housing has become a hot button issue, especially since the COVID-19 pandemic exacerbated concerns of housing accessibility and homelessness. Policies such as rent control have increased in popularity, signaling that Americans view the greed of landlords as a key factor behind rising housing costs. Hamilton disagrees. She believes that zoning regulations are an unknown culprit that are often overlooked as a cause behind housing shortages and price hikes. Hamilton adds that young people need to be more aware of the laws that restrict where they can live and work.

Typically, in America single family housing is the preferred archetype for regulators. This makes housing far more expensive than it needs to be and unnecessarily gets in the way of Americans owning their “dream house,” as Sellgren puts it. Americans are spending more money on rent over time, but mortgages are much more secure, so homeowners don’t have the same problems. Hamilton’s evidence for this claim is the fact that the proportion of Americans who own a home since the 1960’s is relatively fixed, so if one owns a home they’re not affected by the regulations, making it less likely that these regulations will be removed in the long run. This is why young people are having trouble buying homes, as their income that would’ve been saved to purchase a house in the future is being spent on current rent.

“This makes it so that the only type of housing that can be built in this area is a detached single-family house that sits on a yard of a mandated size. In places where land is expensive, that means that the base price of building any price of house is that minimum lot size requirement which will be very expensive…this really sets the U.S. apart from the vast majority of countries in terms of mandating very low residential densities with very homogenous uses.” (Lightly edited)

Zoning affects the nation’s aggregate economic success as well because it causes income and wealth inequality. To make this point, Hamilton and Sellgren discuss superstar cities: areas of exceedingly high economic productivity, but also tend to have some of the most egregious zoning regulations. This prices out innovative people, such as recent college graduates, from their best opportunities, harming individuals, firms, and the nation at large.

“Some of the best job opportunities in terms of income, innovation, and productivity are located in places like the bay area or New York City. Those are also places where it’s really difficult to build more housing due to these local zoning rules and development approval processes, causing people to be shut out of markets where their best career opportunities might be located.”

The scale of the foregone economic benefit is massive. Hamilton estimates the U.S. has missed out on $1 trillion through land use restriction. Average household wages of $10,000/year could have been saved, spent, or taxed.

Though many superstar cities have overly restrictive land use regulations, there is one city that has done well: Washington D.C. Hamilton notes that the District of Columbia, Maryland, and Virginia (DMV) area is more open to multi-family construction and transit-oriented zoning than many other major American cities, thereby allowing working class people to live affordably and be within reach of excellent public transportation.

“If we look at a group called superstar cities that have the highest productivity rates and highest paying jobs: Seattle, Los Angeles, San Francisco, New York, Boston, and D.C, D.C. is the most affordable…that is because the city, and more importantly some of its suburbs have zoned around their metro stations to allow for lots of multi-family housing to be built in numbers we don’t see in those other superstar cities.” (Lightly edited)

Zoning sounds like a really bad deal, so how could anyone support it? Zoning advocates are often labeled as NIMBY’s (Not In My BackYard): people who claim to support affordable housing, but just not in their neighborhood. When one thinks of the typical NIMBY, they most likely create a caricature of a white bread conservative who doesn’t want affordable housing being built near his/her home out of classist and possibly racist sentiments, and a hyperfocus on their own property value. This charicature of zoning advocates definitely exists, but people who support restrictive zoning regulations aren’t necessarily partisan. Hamilton explains how leftists also tend to favor zoning, especially in low-income areas. This is out of a concern about the harm of gentrification and a lack of public services to impoverished areas. Hamilton holds that these beliefs are genuine, but have been co-opted to cover for the true issue for critics of housing deregulation, public service constriction.

“Those arguments concerning gentrification were being used to make left sounding critiques when the concern of the missing middle was really coming from more common concerns about land use change like parking, traffic, construction, or school crowding. There are very real concerns about public services that need to be addressed when more housing is built, like building more schools, but luckily, we have the technology to add new schools in a place like Arlington, and when more housing is built, particularly in a place where there’s a lot of demand for housing, property tax revenues are likely to increase more than public expenditures, which can help with providing schools and other services that are needed to serve more people.” (Lightly edited)

Sellgren and Hamilton conclude the podcast with the long-term vision of housing deregulation: more equitable choice in housing that uses less land and is far more affordable. Hamilton believes freedom in building, and investing in high density housing will provide the returns Americans are asking for.

“My vision is that people at a much wider range of income levels can live in the city or region that is their first choice, much more realized freedom of location, because housing will be more abundant in the regions where it’s most constrained.”

While listening to this podcast I had a few questions. Feel free to share your thoughts as well.

1. As Judge Glock states during his appearance on EconTalk on Zoning and Local Government, Americans simply prefer to live in single family housing, which additionally has less of a negative effect on the environment than multi-family housing due to the use of less CO2 emitting materials in construction, and recent innovation in cars combined with regulation of air pollution significantly decreasing the environmental impact of urban sprawl. If Glock is correct, could Hamilton’s preference of housing deregulation to allow for more multi-family housing lead to higher CO2 emissions?

2. Homelessness is an issue commonly tied to the discussion around housing affordability. Would housing deregulation have an effect on homelessness or is it a larger problem that involves more complex problems such as drug addiction and mental illness, as Sam Quinones discusses on his two episodes of EconTalk (Meth, Fentanyl, and the Least of Us and Heroin, the Opioid Epidemic, and Dreamland?

3. Hamilton mentions Japan and California as cases where housing deregulation has taken place successfully, mostly through restricting the autonomy that local governments have in making zoning laws. Could these examples be evidence of an argument for more top-down zoning instead of local? Could these restrictions on local zoning have unintended consequences due to the asymmetric information that lawmakers have as opposed to the areas they’re legislating?

4. Hamilton cites a statistic that shows the proportion of Americans who own a home has remained relatively steady since the 1960’s, apparently showing that homeowners are relatively stable, and not affected much by zoning regulations. Couldn’t this statistic also be interpreted to show how homeownership is just as attainable today as it was in the 1960’s?

5. During the section of the podcast discussing the success of the DMV area Hamilton mentions that a shortage of public resources is not an issue in an area like Arlington, because it has the infrastructure and technology to expand public goods like schooling to meet the demands that come from an increase in higher density housing. What about areas not as successful as Arlington that don’t have these same capabilities? Would zoning be a more defensible policy in these regions?

Want more?
Judge Glock on Zoning and Local Government at EconTalk
Alain Bertaud on Cities, Planning, and Order Without Design at EconTalk
Jenny Schuetz on Land Regulation and the Housing Market at EconTalk
Enrico Moretti on Jobs, Cities, and Innovation at EconTalk
Janet Bufton’s Great Antidote Archive: Ed Glaeser on the Unseen Beauty of Cities at AdamSmithWorks
Ryan Muldoon's Freedom is Different People: Cities & Inclusive Freedom at AdamSmithWorks
Andrew Smith's On the Development of Communities at AdamSmithWorks
Sarah Skwire's Adam Smith on the Country-City Debate at AdamSmithWorks

Great Antidote Extras: Emily Hamilton on Housing Deregulation

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