The American Housing Market Is Stifling Mobility

Prosperous cities use a range of policies to keep home prices high, shutting out newcomers and limiting economic opportunity

By Edward Glaeser and David Cutler. Excerpts:

"In every year between 1950 and 1992, according to the Current Population Survey, more than 6% of Americans moved across county lines."

"People often move to get ahead, which makes mobility a reasonable measure of economic dynamism. So it’s a troubling sign that since 2007, geographic mobility has dropped by one-third, with fewer than 4% of Americans changing counties annually. The reason is clear: In the most prosperous cities and regions, insiders have figured out how to use regulations, laws and institutions to make life easier for themselves and harder for everyone else. In the process, they have made the U.S. a far less dynamic society."

"for the first time, Americans are no longer moving to places where they can get ahead."

"before 1960, Americans followed the money, finding opportunity by moving to states with higher incomes. Between 1990 and 2010, however, poorer states added population more quickly than rich states. The 2020 Census shows that only three of the 20 fastest-growing large counties between 2010 and 2020 had per capita incomes over $50,000 in 2010. Population growth was higher in large counties where the average annual income is under $30,000 than in counties where it is over $50,000."

"Silicon Valley is a perfect example of the long-term problem. According to the Bureau of Economic Analysis, four counties in northern California—Marin, San Francisco, San Mateo and Santa Clara—have per capita incomes over $100,000. Given that extraordinary prosperity, you might think that people would be flooding into the region, as they did after gold was discovered at Sutter’s Mill in 1848. Yet they are not. Taken together, those counties’ population grew by only 6.5% between 2010 and 2020, below the average growth rate for large counties. For comparison, Harris County, Texas, where Houston is located, has 35% less land than the four California counties, but in the 2010s its population grew 175% faster.

The reason for this is not hard to find. House prices in Silicon Valley make living there prohibitive for all but the very wealthy. Data from the National Association of Realtors show that in the second quarter of 2021, the median sales price for a new home was $1.7 million in San Jose and $1.4 million in San Francisco. In Houston, the median sales price was $307,000. Given the ease of building in greater Houston, house prices there may actually decline once we get through the pandemic. There is little chance that prices will fall in Silicon Valley."

"In California today, property owners consolidate their power by means of land-use regulations. Large parts of Marin County are essentially off-limits to development, sometimes requiring a minimum lot size of 20 acres. Nowhere in Marin is it permitted to build higher than 30 feet."

"California’s insiders have successfully cloaked themselves in the mantle of public service. “Save the Bay,” a nonprofit dedicated to environmental preservation of the San Francisco Bay, was founded in 1961 by three impeccably upper-class women, including the wife of Clark Kerr, the Chancellor of the University of California, Berkeley. The organization succeeded in limiting development through local ordinances and a 1972 California Supreme Court ruling that required all significant new projects to undertake an environmental impact review.

Ironically, from a carbon-emissions perspective, building in coastal California is about the greenest form of development in the U.S. Since coastal California has a mild Mediterranean climate, it requires little cooling in the summer and little heating in the winter. Public transportation is plentiful as well. When environmentalists stop construction near Berkeley, they encourage more building in Texas and Arizona, which have far harsher climates that lead to far greater home energy use and use of cars.

Limited construction leads to high housing prices that push people into far-flung exurbs. In the second quarter of 2021, the median condo price in Los Angeles rose above $600,000. So it’s not surprising that the population of Los Angeles grew an anemic 1.2% between 2010 and 2020, while neighboring Riverside County added almost 300,000 people."

"states should go further and only allow localities to impose regulations and rules that have gone through rigorous cost-benefit analysis."