Photo by Images Money on Flickr.
Zoning in cities like DC is starting to get expensive. Maybe trillions of dollars too expensive.
Economists Enrico Moretti and Chang-Tai Hsieh find that if we lowered restrictions that keep people from building new housing in just three cities (New York, San Jose, and San Francisco) to the level of the median American city, US GDP would have been 9.7% higher in 2009— about $1.4 trillion, or $6,300 for every American worker.
The intuition is straightforward. These cities’ strict zoning rules limit their housing supplies. That sends rents soaring and prevents people from moving in. But because these cities are hubs of finance, healthcare, and technology, they are unusually productive places to work and do business. When people have to live elsewhere, they miss out on all this.
As a result, displaced workers, who can’t move to New York or San Jose, are less productive and therefore earn lower wages. The country misses out on their untapped potential—fewer discoveries are happening, fewer breakthroughs are being made—and we’re all poorer as a result.
Just changing zoning practices in those three cities would lead to some massive shifts, according to the authors. One-third of workers would change cities (although they wouldn’t necessarily move to those three metros). Even under a less drastic scenario, in which 20% of US workers were able to move, GDP would be 6.5% higher. Fewer people would live in places like Detroit, Phoenix, or Atlanta, but those who remained would earn higher wages. And, of course, the likely reduction in sprawl would help address local air pollution, global warming, and habitat loss.
Zoning rules have clear benefits, but it’s a question of balance
Zoning and land-use regulations have benefits. Some ensure basic health and welfare; they keep toxic dumps away from your child’s school, for example (though this works better if you’re well-off). Others aspects of zoning provide more marginal benefits, and to say these laws safeguard your health would be a stretch, like rules that keep duplexes and other multi-family housing out of your neighborhood.
Large swaths of Wards 2, 3, 4 and 5 have these types of rules: they’re zoned “R-1-A” or “R-1-B,” which only permit suburban-style detached homes. As the “general provisions” section of the zoning regulations say, “The R-1 District is designed to protect quiet residential areas now developed with one-family detached dwellings.”
This, of course, is not an accident: DC’s zoning map also shows who has power in the city, and who does not. Parts of Georgetown, for example, have a unique zoning designation called “R-20”; it’s basically R-1, but with stricter controls to “protect [Georgetown’s] historic character… limit permitted ground coverage of new and expanded buildings… and retain the quiet residential character of these areas and control compatible nonresidential uses.”
Meanwhile, equally-historic Barry Farm is zoned RA-1, which allows apartment buildings, like many other parts of Ward 8. And, of course, Barry Farm abuts a “light industry” zone, sits beside a partly abandoned mental hospital, and was carved in two by the Suitland Parkway. While Washington’s elite can use zoning with extra care to keep Georgetown the way it is, the same system of rules hasn’t exactly led to the same outcomes for Barry Farm.
Addressing this problem doesn’t necessarily require us to put skyscrapers in Bethesda or Friendship Heights, turn the Palisades into Tysons Corner, or Manhattanize Takoma. More human-scale, multi-family housing in these places, currently dominated by single-family detached homes, could be a massive boon to the middle class and poor.
If half of such houses in Chevy Chase rented out their garages, or became duplexes, I’d estimate that could mean 25% more families living near world-class transit, fantastic parks, good jobs, and good people.
As Mark Gimein wrote recently on the New Yorker Currency blog:
The cost of living in New York, San Francisco, and Washington is not just a local problem but a national one. That these cities have grown into centers of opportunity largely for those who already have it is not good for the cities, which need strivers to flourish. It would be a shame if the cities that so resiliently survived the anxieties of the atomic age were quietly suffocated by their own success.
If you’re curious for more on Moretti and Hsieh’s work, see this short description of their paper and this PBS interview with Moretti. For an in-depth discussion of zoning’s effect on the economy (with less math), see this speech by Jason Furman, Chairman of the White House Council of Economic Advisers.