No Light Rail in Vancouver!

Glaeser Stumbles on Regional Governments

Mar 28

2007

A year ago, New York Times Magazine called Harvard economics Professor Edward Glaeser “the most exciting urban researcher in half a century.” Many of Glaeser’s research papers show that land-use regulation, not demand, is the primary cause of unaffordable housing.

This work has made Glaeser something of a hero in the antiplanning movement, and I’ve unsuccessfully tried to persuade him to speak at several of our conferences (although one of his co-authors, Bryce Adam Ward, gave an excellent presentation at the 2006 Preserving the Amercan Dream conference).

So it was with great disappointment that I read his latest paper latest paper, “Do Regional Economies Need Regional Coordination?” He argues that, since local government regulation is driving up housing prices, one solution is a regional government that could give local governments direction or incentives to provide affordable housing. Residents of Portland, Denver, and other cities with strong regional governments will find this bitterly amusing.

The East Coast was famous for the affordabilty of its post-war housing markets. Housing in the New York and Boston regions did not become unaffordable until the 1980s.

In the Boston area, where Glaeser lives, most land-use planning is done by local governments. Last year, Glaeser co-authored a report on Greater Boston showing that those local governments had individually passed increasingly stringent rules that shut down homebuilders and drove up housing prices. So, having experienced the problems created by local government but not having studied the problems created by regional government, Glaeser imagines regional government can solve the problem.

“Regional land use planning could reduce the costs on localities of maintaining their own land use systems,” speculates Glaeser. “The bigger advantage from regionalism lies in the possibility of pushing localities to better internalize the costs of their land use decisions.” Notice that he is saying these things could happen. But he doesn’t give any reason why they would happen. He gives lots of reasons why local governments make housing unaffordable, but never stops to think that those same forces will apply to regional governments.

The experience we have in Portland, Denver, the Twin Cities, and other urban areas with strong regional governments is that they do exactly the opposite of what Glaeser suggests. First, rather than save money, regional governments impose a whole new set of rules on local governments and thereby drive up their planning costs. Second, rather than push local governments to improve housing affordability, the regional governments are too easily captured by interest groups that want to reduce affordability.

Glaeser correctly recognizes that regional governments can create incentives for local governments. But he fails to realize that they also create incentives for others. If you give someone the power to control housing policy over an entire region, you give lots of interest groups an incentive to try to influence that policy. Homeowners who want to increase the value of their property, environmentalists who want to curb sprawl, and downtown and inner-city property owners who want to reduce suburban competition are just some of the groups who will try to boost housing prices.

If anything, local governments are more likely to maintain housing affordability by competing with one another to attract new residents. When this doesn’t happen, it is usually because some state law motivates local governments to do the opposite. For example, California’s proposition 13 has convinced local city councils and county commissions that residential doesn’t pay for itself, so they zone out new development. Glaeser’s home state of Massachusetts has limited the amount of land available for development by buying agricultural reserves.

Most other places where housing has become unaffordable have various forms of regional governance. Florida passed a growth-management law in 1985 that drove up housing prices in the late 1990s. Washington passed a similar law in 1991. One major exception is Nevada, where land is short because 90 percent of the state is government-owned.

So Glaeser’s idea of regional coordination is likely to be worse than the disease. I hope he will take the time to study the effects of regional governments, and look at the state laws that have contributed to unaffordable housing in Massachusetts and California, before he promotes regional coordination any further.

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Reprinted from The Antiplanner