One issue in America that everyone wants to solve is homelessness. The reality of having Americans live on the streets while useless politicians live lavishly and break the laws and edicts that they set is infuriating. While homelessness does not have a simple solution, there are things that local governments can do to start moving in the right direction. Viewing homelessness from an economic lens, there is an incorporeal enemy that may be further exacerbating the homelessness crisis: zoning laws.
A zoning law is essentially a regulation on where buildings can be built and what kind of buildings can be built. According to The World Bank, zoning laws are supposed to “ensure complementary uses” and “provide an opportunity to stimulate or slow down development in specific areas”. It is confusing why a local government would want to slow down development in an area, but the only reason I can think of is gentrification. However, there is something worse I can think of than gentrification and that is high housing costs.
According to the Bureau of Labor Statistics, from July 2018 to June 2019, Americans spend about 30 to 40 percent of their income on housing costs. The same article shows that Americans spend a higher percentage on housing than on healthcare and food combined. Therefore, it seems like zoning regulations have outlived their purpose. But why would such outdated regulations still have an enormous effect on people’s wallets? Well, the answer is understanding the scarcity principle.
The scarcity principle states that the price of a good, with a low supply and high demand, rises to meet the expected demand (Investopedia). In terms of topic, the good that is scarce is housing, and the agent of scarcity is the aforementioned zoning laws. The economic theory doesn’t just make logical sense, but it has been proven to be correct time and time again. A study published in the National Bureau of Economic Research states that zoning reform is a good place to start if one wants to reduce housing costs. Another study by Washington University has shown examples like how new regulations in the Greater Boston area have caused housing prices to increase by between 23 and 36 percent.
A more modern example can be found in the Speaker of the House’s home city of San Francisco. The average housing price in the city of San Francisco is $1.4 million according to Zillow. The same people note that the average price of housing in the US is $269,000. In other words, the average price of a house in San Francisco is over five times the national average. In a city of over 3 million, one would need to be a millionaire to pay for a house. Heck, renting a one-bedroom apartment can cost up to $2,680. This makes San Francisco apartment prices more expensive than that of the most populated city in the US, New York. This might be due to San Francisco’s slow approval process on housing construction projects because it bottlenecks the supply even more. It may be true that cities run by the Democratic Party seem to have the highest housing prices, but not all Democratic cities make the same mistakes. An example would be Houston, Texas. Houston has been consistently making zoning reforms since the late 1990s. Now the city’s median housing price is below the national average. Houston shows that this does not have to be a blue city or a red city issue. As more people become aware of this, we can make simple solutions to the housing crisis without relying on useless politicians and their price-increasing zoning laws.
