I had a chance to read The Gated City.  Ryan Avent offers a compelling case about of the misuse of land use powers by local government.  Sadly, his argument echoes the findings of the New Jersey Supreme Court in its 1975 Mount Laurel decision.  There, the justices found that municipalities were abusing their state-delegated discretion over land use matters to avoid housing their respective fair shares of New Jersey’s poor residents, in violation of the state’s constitution.  Today, 36 years later, the issue is not simply that post-war Euclidean suburbs are zoning out viable housing options for poor people, but that entire metropolitan regions are failing to provide housing options for the middle class.  When it comes to metropolitan housing, the effects of NIMBY-ism have become a tragedy of the commons.

Avent depicts how inflated housing costs in some of America’s most dynamic regions are driven by legal restrictions on the expansion of housing supplies.  He argues that these costs now frequently outweigh the economic benefits of working in the same regions.  As a result, large numbers of Americans have migrated out of the economically vibrant regions around places like New York City, Boston, Washington, and San Francisco, where money, expertise, and strong networks are concentrated.  Instead, he argues, they have relocated to more affordable regions like Phoenix, Houston, and Las Vegas, which inherently offer fewer economic opportunities.  But I’m not persuaded that these groupings of cities necessarily occupy two sides of a static dichotomy.

Avent’s analysis is compelling, but his approach is essentially libertarian, and I don’t agree with the embedded assumption of his argument: namely, that the housing markets of America’s great metropolises ought to be left to find their natural equilibria.  In the last chapter, he writes:

[A] good first step would be to strengthen urban property rights. A very straightforward way to accomplish this would be to declare that a neighborhood can limit development on land to whatever extent it wants, so long as it’s willing to either buy the land in question or pay the land’s owner to comply. Among the key problems associated with NIMBYism are the wedges driven between societal costs and private costs, and between private costs and private benefits.

Are these killing the American Dream?

Penn Central tried a limited version of this same argument at the U.S. Supreme Court in 1978, and lost.  I’m actually sympathetic to Penn Central’s contention that individual properties should be purchased if they are to be singled out from adjacent properties as landmarks; otherwise, we create a disincentive for the private construction of beautiful buildings.  But Avent takes his argument a big step further, essentially saying that the fundamentals of Euclidean zoning, and even the sensibly modest Victorian building codes, should (ideally) be done away with in favor of urban private property rights.  This is too much.  A healthy city is not a culture in a Petri dish: The slum tenements and social depravity of urban life in the Victorian period showed the dangers of unbridled land use.  The legal and political systems have roles to play in mediating the use of urban land.

But Avent’s piece is also a wake-up call: The system of land use regulation in this country is broken, and it is failing too many of our people.  What’s more, its failure is discrediting the moral arguments on which it rests.  In too many places, land use regulation has ceased to make life better, and has instead become a tool of exclusion and social inequality, a barrier that prevents people from finding decent homes and work spaces, and a way to game the legal system for the benefit of local political insiders.  Bad land policy has also resulted in the scarring of our landscape by ugly, politics-driven development.  These costs are no longer reserved for poor people, but now also harm many who are educated and rich.  Without serious reform, calls for scrapping the entire Euclidean régime will become increasingly difficult to resist.

Independent of concerns about the legitimacy of zoning, magnet cities like New York and San Francisco, for their own economies and equities, need to develop much, much larger and more  durable stocks of affordable housing.  This could be accomplished through limited-equity legal arrangements, with a measure of planning guidance; and also through targeted, substantial increases in regional densities.  At the end of the day, however, there needs to be a balance between market forces and human considerations.

Reason‘s Peter Suderman recently interviewed Ryan Avent about his new piece, The Gated City. I’m looking forward to finding some time next week to read the book.  Judging from Avent’s interview responses, his analysis sounds accurate: Land use laws are distorting the costs of housing in older, denser, and more desirable US cities. That is to say, because of the restrictions that zoning, massing, preservation, and other rules have placed on the supplies of local housing stocks, demands cannot be met, and the prices of land in high-demand regions (New York City, San Francisco, Boston, etc.) exceed those that would naturally arise from the strengths of their local economies.

By itself, the consequence of higher regional housing costs isn’t a reason to gut local land use laws.  High housing costs have driven a lot of redevelopment, and have created a good amount of new wealth.  Furthermore, the benefits of land use regulation in the realms of aesthetics, logistics, historic preservation, and the environment can be priceless.  But the dilemma does suggest that policymakers should be cognizant that they are engaging in a balancing act.  On the issue of such mixed incentives, I liked this:

Reason: You argue that density has a lot of benefits for residents. But if greater density lowers housing prices, then don’t local homeowners have a pretty strong economic incentive to keep density low?

Avent: Yes—up to a point. Limits on development are somewhat like cartels or unions in this way: They allow insiders to capture rents, but only to the extent that they don’t put themselves out of a job in the process. In the short run, productive agglomerations are fixed, but in the long-run they’re mobile. If development rules in Silicon Valley drive enough people to other, more affordable agglomerations, then other innovators may eventually find it advantageous to follow, and the region may lose the unique factor that created the opportunity for rent-seeking in the first place. And in general, this dynamic is one reason why it’s a bad idea to subsidize homeownership. Renters are happy for … costs to stay low.

Avent advocates institutional reforms that would make allowances for greater overall densities by offsetting new development restrictions in certain areas with more lenient guidelines in others. I think a good aesthetics framework can also play a role in successful upzoning.  85 years after Euclid, and much longer since the introduction of local building codes, it should go without saying that, done wisely, land use regulation can be a public good.  But Avent is wrestling with what has become a more urgent topic: In the choking of the present economy, bad land policy has been, and continues to be, an unnamed culprit.  It’s a point that needs to be made.