We Need to Build Our Way Out of This Mess

By Eli Dourado. From The New York Times. Mr. Dourado is an economist and a senior research fellow at the Center for Growth and Opportunity at Utah State University. Excerpt:

"The solution to high housing costs could not be simpler: Build more homes. To address housing affordability, many progressives have advocated subsidized affordable housing programs. These programs may not be adequate to generate sustained cost reductions, and they aren’t necessary. What will work with certainty are the laws of supply and demand. If we increase the supply of housing enough, prices will fall. Any solution to our infrastructure problems will likewise boil down to the need to build infrastructure.

But to build housing and infrastructure, we must sweep aside the regulatory obstacles that stand in the way.

In housing, zoning and related rules are the culprits behind the restricted supply of new homes. Zoning, in theory, is supposed to separate incompatible uses of land — for example, keeping polluting factories separate from housing. In practice, it has an ugly history of promoting racial segregation. In 1910, Baltimore adopted the country’s first explicitly racial zoning law, barring Black residents from moving into predominantly white neighborhoods and, cynically, vice versa. The Baltimore law was copied in cities all over the South until the Supreme Court held that a version in Louisville, Ky., was unconstitutional in 1917. Even after this ruling, explicitly racial zoning codes in some cities tested its limits.

While we would not tolerate open segregationist justifications for zoning today, laws that ban multifamily construction in certain neighborhoods — along with parking minimums and restrictions on lot coverage, setbacks and building heights — continue to perpetuate segregation by income and race. These rules reduce the supply of housing, increasing its cost. Recent research estimates the value of the “zoning tax,” the amount by which zoning rules are artificially raising the cost of land. In our coastal hubs — San Francisco, Los Angeles, Seattle and New York — the zoning tax per quarter-acre of land exceeds twice the city’s median income. In San Francisco, it’s four times the median income.

In infrastructure, too, the proximate obstacle to building more is legal. Under the National Environmental Policy Act, passed in 1969, federal agencies must produce a detailed statement of environmental impacts for any action — including granting a permit — that significantly affects the human environment. In contrast with the ugly motivations driving zoning, NEPA came into existence riding a wave of environmental consciousness. It was motivated by two well-meaning but mistaken beliefs: that material progress was the enemy of environmental quality and that environmental justice could be served through greater citizen input.

The act slowed progress in infrastructure. Per-mile spending on the Interstate System of highways tripled between the 1960s and the 1980s, with the inflection point coming in the early 1970s, when NEPA took effect. And in practice, the citizen input function of NEPA has been used not to enact environmental justice but to let wealthy communities oppose projects — including transportation and public works projects — that inconvenience them. To protect against community opposition, environmental impact statements under NEPA have ballooned over the years and now take an average of four and a half years to complete. One that was finalized in 2019 took almost 16 years.

Actions that affect the environment deserve scrutiny, but the biggest cost of NEPA is with respect to federal actions that have no impact. When permit approvals do not significantly affect the human environment, agencies and project sponsors have to prove that through another report. These environmental assessments, of which over 10,000 are produced per year, likewise add years to the process.

And until an environmental assessment or environmental impact statement is finalized, no work on the project in question can begin. Even after finalization, a lawsuit filed by virtually anyone can challenge the adequacy of these documents and bring the project to a halt.

The delay and risk in government decision making affect both government-led initiatives and private sector projects, which depend on speedy returns for financing. One reason venture capitalists have invested so much in software companies and relatively little in transformative physical-world technology is that the returns in software come faster and face less regulatory risk.

Environmental review has far-reaching economic and social consequences. It slowed the 2009 economic recovery, as infrastructure projects specified in the American Recovery and Reinvestment Act were subject to at least 192,705 NEPA reviews. Projects funded through this year’s infrastructure bill will undoubtedly face similar delays. Even immigration policy is not immune to NEPA lawsuits. Arizona is challenging President Biden’s order to halt construction on the border wall on NEPA grounds."