In an effort to encourage cities and states to be “more thoughtful” in designing land-use restrictions, the Council of Economic Advisers (CEA), the President’s economic policy advisors, is drawing attention to the link between land use restrictions and the country’s slowing worker productivity rates and rising income inequality. As the Wall Street Journal recently noted, this discussion comes out of a body of research the CEA produced this year to highlight the slowdown in productivity growth and the growing wealth gap.
The CEA’s chairman, Jason Furman, focused on this link in a recent speech at a housing conference co-hosted by the Urban Institute and CoreLogic, a data company. In his speech, Furman maintained that excessive or unnecessary land use or zoning regulations discourage housing production, thus creating an artificial supply constraint. This, in turn, creates upward pressure on housing prices and “may undermine the market forces that would otherwise determine how much housing to build, where to build, and what type to build, leading to a mismatch between the types of housing that households want, what they can afford, and what is available to buy or rent.”
The result is a barrier to geographic mobility, which Furman contends “reduce[s] the productive use of our resources and entrench[es] economic inequality.”