If California rolled back its land rules to where they stood in 1980 U.S. gross domestic product could permanently increase by about 2%-If every state rolled back land regulations to 1980 levels, GDP could rise by as much as $1.8 trillion

See What in the Sam Hill Are Cows Doing on Sand Hill Road?: They’re eating the priciest grass in America, thanks to California’s out-of-control land-use rules by Lee E. Ohanian and Edward C. Prescott. Excerpts: 

"Land regulations have run amok, and not only in Menlo Park. In addition to governing how private property can be used, these rules implicitly dictate which special-interest groups have a say in commercial and residential development. Building proposals bring dozens of vested interests out of the woodwork, ranging from environmentalists, to “not in my backyard” homeowners, to affordable-housing lobbyists.

The question is what this costs the larger economy. Many theories have been raised to explain why the U.S. has been plagued by weak growth, which began even before the 2008 financial crisis. But as much as 40% of the slowdown may be due to increasingly severe land regulations, according to our research, conducted with economist Kyle Herkenhoff at the University of Minnesota.

Land regulations add friction to the economy in that they impede the flow of workers and capital from regions with poor job opportunities to places with good ones. Interstate migration rates used to be high. Between 1950 and 1980, California’s population increased from a little over 10 million to nearly 24 million, and its share of the national population rose from about 7% to 10%. This growth reflected a bounty of new economic opportunities that created millions of high-wage jobs in industries ranging from technology and aerospace to high-skilled manufacturing and financial services.

California’s boom was facilitated by exceptionally good state and local economic policies, which in turn reflected a bipartisan understanding that the public’s interest was served by government that helped, not hindered, development. In the 1950s and 1960s, capital spending accounted for as much as 20% of the state budget. California built schools, roads and water systems to support its population growth. These public-private synergies made California into the most populous state in the country, and the second most productive, behind only New York.

Despite rapid growth, housing remained relatively affordable. In 1970 California’s home prices were about 36% higher than the national average. But that changed as tightening land regulations began to constrain development. By 1990 California housing was 147% more expensive than the nation overall.

These regulations have damaged California and the national economy. Stratospheric home prices have redirected millions of workers away from the Golden State’s highly productive industries to states with more permissive land regulations and lower housing costs, but also with fewer high-paying jobs."

"If California rolled back its land rules to where they stood in 1980, our research estimates that the state’s population could ultimately grow to 18% of the country. U.S. gross domestic product could permanently increase by about 2%, or $375 billion. If every state rolled back land regulations to 1980 levels, GDP could rise by as much as $1.8 trillion."