All Intensive Purposes

Further to my recent posts about Carol Lloyd's columns, in which I complained that Lloyd was writing about a form of housing regulation (tenant protections) without discussing its hidden costs, along comes Brad DeLong to discuss the work of economist Ed Glaeser about real-estate markets. Glaeser is interested in the effect of local regulations -- including, but not limited to, zoning regulations -- on housing markets. Glaeser "views supply as crucial to appreciating what has happened to the U.S. real-estate market over the past 30 years." Supply is constrained by land and the transportation system, of course, but moreso by government regulations that prevent increasing density. "[A]fter sorting through a mountain of data, Glaeser decided that the housing crisis was man-made. The region's zoning regulations -- which were enacted by locales in the first half of the 20th century to separate residential land from commercial and industrial land and which generally promoted the orderly growth of suburbs -- had become so various and complex in the second half of the 20th century that they were limiting growth." (These quotations by Mark Thoma and then Brad DeLong from the NYT.) DeLong posits that a couple of things are going on, one of them being "the transformation of local governments -- especially local governments of neighborhoods made up of detached houses -- from machines to enrich developers via new construction to machines to enrich homeowners by generating upward pressure on house prices."

As an empirical matter, this strikes me as correct. In cities like San Francisco, it is famously impossible to tear down housing to put denser housing up, except in neighborhoods that really need help. In practice, the neighbors have a veto, and they use it. One gets a sense of just how comprehensively the government frustrates development from this 1999 article in the San Francisco Chronicle about Bay Area efforts to foster "transit villages" near BART stations. Or there's this 2002 Carol Lloyd column about "smart growth." Lloyd writes, "smart growth recommends concentrating the densest development -- both residential and business -- in cities and near public transport so open space is preserved and cities become less car-dependent and therefore more livable." Something is very wrong if government action of some sort is required for this to happen: market forces should be making it happen already.

But to DeLong's question, have municipal governments ever been anything but machines to enrich homeowners? Without the benefit of any real knowledge or research, I would suggest that municipal governments have always been fairly responsive to the interests of homeowners. Politicians usually are pretty responsive to the voters, and the focus in local elections is narrower than that in state or national elections. Homeowners usually are probably more numerous than tenants and in any event more likely to vote. But I would further suggest that municipal governments could enrich developers, too, because the interests of developers and homeowners were sufficiently aligned. So maybe the question is, when did the interests of developers and homeowners diverge?

As DeLong notes, "starting around 1970, many of America's metropolitan areas filled up in the sense that there was no longer greenfield land within less than half an hour's commute of anywhere you wanted to go." At this point, I would imagine that towns like Cambridge and Palo Alto effectively shut the developers out, greenfield development being one thing, but anything that changes a neighborhood something else. (Also a point at which I imagine it became much more difficult to improve commutes in material respects without spending massive amounts of money, but I know even less about that issue.)

If so, this suggests that the problem we have is that municipal governments are too responsive to their voters, particularly homeowners, and therefore do not adequately serve the broader public interest.

eta: Jane Galt posts on the same topic.

eta: Mike points me to Out of Cheese's discussion of the mortgage deduction, and an article re the same in yesterday's NYT Magazine.