In many cities–particularly urban areas on the coasts–rent and home prices are much higher than in other areas. Many politicians talk about a housing crisis. Famously, Jimmy McMillan ran for office multiple times under “The Rent is too Damn High” Party.
But why is the rent so high? Today I turn to a classic economics paper from Edward Glaser and Joseph Gyourko. They find that regulations are driving the high cost of housing in many of the more expensive cities in the U.S.
As a whole, our paper concludes that America does not uniformly face a housing affordability crisis. In the majority of places, land costs are low (or at least reasonable) and housing prices are close to (or below) the costs of new construction. In the places where housing is quite expensive, building restrictions appear to have created these high prices.
One implication of this analysis is that the affordable housing debate should be broadened to encompass zoning reform, not just public or subsidized construction programs. Although poor households almost certainly are not consuming the typical unit in areas with extremely high prices, we suspect that most filtering models of housing markets would show that they too would benefit from an increased focus on land-use constraints by affordability advocatesGlaser and Gyourko (2003)