One of my favorite economists at Harvard is Edward Glaeser, who has done outstanding work on cities and on housing. Earlier this year, I gave a positive review of Conor Dougherty’s Golden Gates: Fighting for Housing in America. In that book, Glaeser is one of the heroes who recognizes that, as my title put it, the solution to expensive housing is more housing.
One reason I’m particularly fond of Glaeser is that he’s an activist. In my review, I wrote:
While many academics who come up with powerful results simply move on to the next interesting area, Glaeser believes in publicizing his results. Writes Dougherty, “He started blogging about housing costs and writing op-eds about housing costs and becoming the subject of various newspaper profiles where he called the advent of strict zoning the most important shift in the U.S. housing market since the adoption of the automobile.”
In Econ Focus, a publication of the Richmond Federal Reserve Bank, interviewer David A. Price, who generally does excellent interviews, does a nice interview of Glaeser.
Asked about the future of small towns after the pandemic, Glaeser says it’s a tale of two towns. The good news:
If you are a small town like a college town, a place with high levels of amenities and beautiful scenery where rich people want to go, I think that the combination of the ability to do work remotely and perhaps some enduring pandemic fears means that you are as strong as you’ve ever been, if not more so. These places are poised to benefit.
Take your Silicon Valley startup with 15 smart, hungry young people. Do we truly think in five years these people are just going to be Zooming it in from their suburban bedrooms? That sounds totally implausible to me. That sounds like a totally different work model that will lack all the energy and high quality in-person connections you get from being in the same room as one another.
But on the other hand, are these 15 people going to decide, “Well we all love skiing, we’re tired of paying Silicon Valley prices, should we relocate to Vail?” Or say, “We don’t want to pay taxes, let’s relocate to Austin.” Or, “We want better surfing, let’s relocate to Honolulu.” That feels entirely plausible to me. The technology supports the mobility en masse of these groups to some different area. Places they’re most likely to relocate to are high-amenity places that will appeal to them along one of these dimensions.
But, he continues:
On the other hand, if you’re talking about small towns in relatively low-amenity places, places that are low density, farmland, low levels of education, these places have been declining for decades, and I see little reason why the decline would be reversed anytime soon.
His answer on subsidies to housing came as a surprise, though. Glaeser says:
Take housing. You really don’t need to subsidize the production of low-income housing in most of Texas, because they have an unfettered market that does a great job of providing lots of low-cost housing to middle-income residents. If you have Detroit, you don’t want to produce more low-cost housing, because they’ve got an abundance of low-cost housing there. But on the other hand, there’s probably a good case for doing something about low-cost housing in San Francisco or New York or Boston.
That suggests to me, at least, that you want policies like the low-income housing tax credit that subsidizes new housing construction. You want that to be spatially limited. You want it to go in areas where there’s a genuine dearth of low-income housing. At the same time, you could have more housing vouchers in the areas where housing supply is elastic. You can have the right policy for the right place, which is something that America has traditionally found very difficult to do. But it’s just basic economics.
I would have thought he would recognize, based on his own excellent work, that the thing to do in San Francisco, New York, or Boston is what they are starting do in San Francisco, namely, allow more housing. To his credit, he does propose that later in the interview, but simply allowing more housing would likely be more effective than subsidizing low-cost housing.
READER COMMENTS
Thomas Lee Hutcheson
Dec 21 2021 at 6:42am
There are two different housing problems. One is that it is hard to have “low income housing” in places that rich people like to live. The other is that it is difficult to expand housing for rich people in areas that rich people want to live. It’s easier to see how smarter (less restrictive) zoning could fix the second problem. Its harder to see what the solution is for the first problem if it is a problem at all, though it may be in the area of road and street pricing to reduce congestion losses.
Matthias
Dec 24 2021 at 1:33am
Adding more housing for rich people will also provide more housing for poor people.
When rich people move to some fancy new place, they leave behind an ever so slightly less fancy place that someone slightly less rich can move into, and so on down the ladder.
Mark Barbieri
Dec 21 2021 at 7:12am
I would like to see federal housing subsidies eliminated for any place where the increase in housing units doesn’t keep up with the growth in population.
Alan Goldhammer
Dec 21 2021 at 7:54am
Very good post!!! There was a nice article in the NY Times business section on Sunday on the impact of the change in California law that legalizes the building of accessory dwelling units (ADUs) on existing built land. This has great potential. Our house/property inside the DC Beltway is 12,000 sq ft and would easily support and ADU. It’s going on the market in late January and I will be interested in seeing what the purchaser does (though the likely outcome is the building of a McMansion if they decide to tear down the 1955 split).
Glaeser is correct about the future of small cities/towns though I’m a little more optimistic than he might be. The advent of wide scale broadband adds great flexibility to remote working. One good book to read on this is Jim and Deb Fallows, “Our Towns: A 100,000 -Mile Journey into the Heart of America.” There is also a very good HBO documentary based on the book.
Jon Murphy
Dec 21 2021 at 8:14am
I agree. My hometown in Massachusetts has been trying to brand itself as a low-cost alternative to living in Boston and WFH has helped that message. I also know many folks are moving out to Frederick County, MD (which stands to benefit as it is fairly close to DC, Baltimore, and Harrisburg)
robc
Dec 21 2021 at 11:11am
I am with you. I think he is mostly right, but I am a little more optimistic too.
I recently moved to the Ft Collins area, which fits the “place rich people who can work from home want to move” scenario (not that I would call myself rich, I am safely in the middle of the 4th quintile – not sure if top 30% is quite rich). However, my 2nd choice destination was probably somewhere in KY, probably Bowling Green.
While it isn’t a destination city, it is a college town. Some town like Dawson Springs (population 2500 – before being destroyed by the tornado) wasn’t an option. I mention it, not just because it is now gone, literally 75% destroyed, but because it was the hometown of my wife’s parents. It was already in bad shape economically — no one was going to be moving to a small town like it. I don’t know what towns like it can do to turn themselves around, maybe nothing?
Alan Goldhammer
Dec 21 2021 at 2:29pm
College towns are great places to retire to, particularly if it is a big state university. I got my PhD in chemistry at Indiana where there is a world class school of music. there is a full size opera house on campus with performances on Saturday night. I don’t know if the university has programs for seniors but that would be a great way for them to makes some money along the way.
Jon Murphy
Dec 21 2021 at 3:44pm
That’s one thing I miss about GMU. We have a world class music and theatre program. There were always concerts and shows on campus. Students got heavily discounted tickets.
MarkW
Dec 22 2021 at 2:21pm
Trying to get alums to come back in retirement has been a thing for a while. Here’s our local version.
MarkW
Dec 22 2021 at 12:19pm
Glaeser is one of the heroes who recognizes that, as my title put it, the solution to expensive housing is more housing.
Ideally that should be the solution. But I think the actual solution is far more likely to be what we’re already seeing — prices dropping in response to cities becoming less attractive places to live resulting in declining demand.
If you have Detroit, you don’t want to produce more low-cost housing, because they’ve got an abundance of low-cost housing there.
Oddly, they really don’t. The sticker prices on homes in the city of Detroit are low because the other costs of living (property taxes, city income taxes, home and auto insurance) are high. This is why the city has had to tear down tens of thousands of abandoned homes while developers were building equivalent numbers of new ones out in the suburbs and exurbs.
If you are a small town like a college town, a place with high levels of amenities and beautiful scenery where rich people want to go, I think that the combination of the ability to do work remotely and perhaps some enduring pandemic fears means that you are as strong as you’ve ever been, if not more so. These places are poised to benefit.
Yep, and I live in one (Ann Arbor). But this not new — many of these places were already popular (and getting pricey) years before the pandemic.
Take your Silicon Valley startup with 15 smart, hungry young people. Do we truly think in five years these people are just going to be Zooming it in from their suburban bedrooms?
Probably not. But a young person in a small startup is far from the typical rank-and-file SV tech worker in a cubicle farm (who’s also pretty likely to a temporary immigrant on an H1B visa). And note that most of Silicon Valley *is* suburban. The SV tech industry grew up mostly in the ‘burbs.
Bottom line — I’d like to think that the solution was going to be a great loosening of restrictions on development. But that’s a long, arduous political process whereas simply making an area less attractive to prospective residents clearly can be ‘achieved’ pretty quickly.
Matthias
Dec 24 2021 at 1:37am
As far as I know there are basically no cubicle farms in Silicon Valley. It’s all open plan offices.
I have some experience with the industry.
The idea of whole teams or small companies moving seems somewhat realistic.
Though access to capital and new talent in the valley is probably better then elsewhere.
But eg a team at Google moving from the head quarters in Mountain View to the existing office in Boulder, Colorado, seems quite plausible, too.
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