A new paper by two leading economic geographers suggests this argument is simply too good to be true. Titled “Housing, Urban Growth and Inequalities” and forthcoming in the journal Urban Studies, it’s written by Andrés Rodríguez-Pose of the London School of Economics (LSE) and Michael Storper, who divides his time among the LSE, UCLA, and Sciences Po in Paris. According to Storper and Rodríguez-Pose, the notion that an insufficient supply of housing is a main cause of urban economic problems is based on a number of faulty premises. They say the effect of supply has been blown far out of proportion.
They agree that housing is part of the problem: “Housing market failures can imperil local economic growth and generate problems such as segregation, long commute times, deteriorating quality of life, homelessness, and barriers to social mobility for certain populations,” they write. But housing policy, and zoning restrictions in particular, are certainly not the be-all and end-all of urban problems. Upzoning expensive cities is no match for the deep divides within—and especially between—cities, and is wholly insufficient to remedy them. [...]
A key factor here is the growing divide between highly-paid techies and knowledge workers and much lower-paid people who work in routine service jobs. These service workers end up getting the short end of the stick, spending much more of their income on housing in expensive cities. “Under these circumstances moving to big cities provides no immediate benefits for workers without college education,” Rodríguez-Pose and Storper write. [...]
Solving the economic and geographic divisions of America and other advanced countries is a task that goes far beyond local housing policy. “Planning deregulation and housing costs are neither going to solve the problem of areas lagging behind, nor are they likely to have an impact on the economic development of dynamic cities,” Rodríguez-Pose and Storper write. Worse, they caution, “an excessive focus on these issues at the expense of serious and sustainable development strategies, can fuel economic, social and political distress and anger in declining and lagging areas that can threaten the very foundations on which economic activity, both in less developed and more prosperous areas, has been erected in recent decades.”
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