Research Shows Land Use Regs Contribute to Income Inequality

For years housing developers have decried the increasing costs of regulation, and now there’s research showing that those regulations do indeed contribute to higher housing costs and an increase in income inequality. An article in the Wall Street Journal outlines the issue:

According to research by Daniel Shoag, an associate professor of public policy at Harvard University, and Peter Ganong, a postdoctoral fellow at the National Bureau of Economic Research, a decades-long trend in which the income gap between the poorest and richest states steadily closed has been upended by growth in land-use regulations.

Moving to a wealthier area in search of job opportunities has historically been a way to promote economic equality, allowing workers to pursue higher-paying jobs elsewhere. But those wage gains lose their appeal if they are eaten up by higher housing costs. The result: More people stay put and lose out on potential higher incomes.

Many of the cities with the stiffest demand for housing, and thus the highest prices, are on the Atlantic and Pacific coasts. They also tend to be the cities that impose the strictest rules on land use.

The article provides several examples of how increased regulations are driving up housing costs and, as a result, increasing the stratification between low- and high-income households. It’s definitely worth a read.