If this season’s political campaign rhetoric has demonstrated anything, it’s that governors love to take credit for job creation. What I haven’t seen any governor mention, though, is that there is huge opportunity for economic growth in relaxing zoning codes. Most obviously, allowing new opportunities for infill development will create construction jobs. More significantly though, in the long run, cities allow for faster economic growth (and job growth) than other locations.
The regulations that prevent cities from growing keep economic progress below what it otherwise would be. While researchers disagree over whether population density or total population is the variable that is most significantly correlated with economic growth, either way zoning plays an important role in holding back job growth, providing policymakers who are willing to deregulate with opportunities to improve their competitive standings next to other cities.
Political incentives stand in the way of this growth opportunity, however. Most zoning restrictions benefit a city’s current residents at the expense of potential residents. For example, minimum lot size requirements serve to raise the price of homes, preventing low-income people from moving into neighborhoods that current residents wish to keep exclusive. By changing this current order, policymakers risk losing the support of their homeowning constituents, and interest likely to be better organized than renters and potential city residents. Limitations on housing supply raise the value of existing homes, artificially raising the value of residents’ assets, which homeowners strongly fight to protect.