Drawbridge Politics, or Zoning for BoBos

(Originally published March 5, 2006)

Courtesy of blogger Jane Galt, I had a chance to look at an article in the New York Times Magazine (free subscription) about the work of a Harvard economist, Edward Glaeser. Glaeser’s ideas confirmed much of what I have believed for some time about supposedly “liberal” planning and zoning restrictions. Such controls are particularly strong in places where affluent political liberals reside, what David Brooks called “BoBos in Paradise,” “BoBos” standing for “Bohemian bourgeoisie.”

In my own life, I’ve seen this phenomenon at work in two Southern California beach
cities, Santa Monica and Laguna Beach. In ‘80s Santa Monica, I served one term on the City Council of what then and now is often called the “People’s Republic” of Santa Monica, because of the affinity of the political leadership to certain kinds of left-wing nostrums like rent control for the benefit of retired communists and ex-graduate students and “inclusionary zoning.” In Laguna, an arbitrary and tyrannical Design Review Board stands athwart every property owner’s plans to remodel or build a home. All this in the name of protecting the environment. 


The Times Magazine article summarizes some of Glaeser’s ideas this way: Glaeser has come to believe that changes in zoning regulations may be the most important transformation in the American real-estate market since the mass acceptance of the automobile. In his view, these regulations have essentially created a "zoning tax" that has pushed prices far above construction costs. Very, very far above construction costs. It is not a perspective shared by all housing analysts; some economists have been far more inclined to blame high prices on high demand (spurred by low interest rates) or on rampant speculation. Others agree with Glaeser in emphasizing supply but not necessarily fixing on zoning. Karl Case, for instance, an economist at Wellesley College who counts himself a fan of Glaeser's, agrees that lack of supply has led to steep prices in the Boston area, but he attributes the housing shortage not just to zoning but also to the nature of the construction business and the scarcity of large desirable tracts of land. Still, among the half-dozen leading economists who study housing supply, there seems to be wide agreement that regulations have had a tremendous effect on prices. "I think the evidence is overwhelming," says John Quigley, an urban economist at Berkeley who has looked specifically at the effects of regulation on the California market. As Glaeser says: "It's so easy to forget the world that we were living in around 1970, when basically almost all of the value of houses was in the physical infrastructure. That was actually the cost. There was some land, and it was worth something, but it wasn't worth more than 20 percent of the value of the house."

Even in New York City, Glaeser says, the price of an apartment back then was essentially the cost of building the next floor. In researching New York City's housing prices, in fact, Glaeser and Gyourko discovered that over the past 30 years, the average height of new residential buildings in Manhattan decreased in size. "That's crazy," he insists, especially in light of how much the demand to live in New York has increased. "You know, if prices in Manhattan are skyrocketing, you should be building more and more at 50 stories, rather than at 30. Not the reverse." So is it his contention that Manhattan could build far more than it has recently? "Oh, for sure," he says. "Technologically? Certainly. No reason why you couldn't." Let's go back to Manhattan in the 1920's, Glaeser says. "New York in the 1920's is a pretty developed place, a pretty mature place. But they're producing a hundred thousand units a year. They're tearing up swaths of Manhattan and building higher buildings."

That would be legally and politically impossible today, but as he and Gyourko see things, it is precisely those legal and political roadblocks to "tearing up" the city that have made the place so expensive. Actually, in 2004, the two men took a close look at Manhattan and estimated that one half or more of the value of condominiums in the borough could be thought of as arising from some type of regulatory constraint preventing the construction of new housing. In short, zoning and other building restrictions are major factors in increasing house prices.

My own town, Laguna Beach, has become one of the most expensive cities in Orange County, as far as housing prices go. If the free market were allowed to function, its pleasant climate and coastal amenities would no doubt lead to the construction of high-rise condos as in Ipanema and the Barra de Tijuca in Rio de Janeiro. Zoning and design controls have made such an evolution impossible; Proposition 13 has reduced the pressure of market-driven property taxes to create the “highest and best use” of residential properties. The result has been to drive both the working class and industries that rely on working class labor out of Orange County, and to a degree, out of California. In a 1926 case called Village of Euclid, the US Supreme Court approved municipal zoning as a proper exercise of the police power, limited by later cases only to the extent that zoning must not deprive an owner of all economic use of his property. The phrase “Euclidean zoning” thus refers to the case, not to the logical nature of the process.

Nowadays, zoning and planning rules have become arbitrary and unpredictable, a different but related issue. What cannot be gainsaid is that they help them as has, and exclude them as would like to have--”God bless the child that has his own.” At least, following Glaeser, we should understand that despite the veneer of liberalism, the effect of most zoning is to exclude the young, the poor, and the aspiring, in favor of the old and the lucky, all of whom use zoning, environmentalism, and design controls to protect their turf against interlopers. “I’ve got my share of the castle. Let’s pull up the drawbridge!” Less hypocrisy. More understanding. Who knows where it will lead? But it’s a beginning.