The Economic Costs of Restrictive Housing Practices

It is not unusual for cities to engage in restrictive housing practices that are designed to benefit existing property owners at the expense of new entrants. Restricting competition to benefit incumbents is pretty much what government does.  However, a new study by
Chang-TaiHsieh of the University of Chicago seeks to quantify the cost of these anti-competitive practices -- and they appear to be huge.

We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009.

So while politicians gnash their teeth around strategies to get growth up a percent or two, they are simultaneously working against that growth by employing restrictive housing policies to benefit incumbent property owners. These people who seek protection might actually be better off with higher overall levels of economic growth. But the politicians might not be and, after all, aren't they why government exists?

You can read the entire study here. https://eml.berkeley.edu//~moretti/growth.pdf