To continue on the topic of the consequences and negative impact of too many land-use restrictions from our last month’s edition, Justin Fox, author of the Myth Rational Market, presented in Bloomberg View a catching point of view on zoning regulation’s impact in San Francisco. He notes that despite San Francisco being arguably the largest center of the U.S. tech industry, with a bustling economy and young, affluent people attracted to its many amenities, the population has only increased by 10% since the 1950’s. This is largely due to a restricted housing supply, which drives high rental rates and housing prices. The high demand and low supply has resulted in San Francisco being one of the most expensive cities in the country to live in.
He goes on to say many San Franciscans are trying to maintain their way of life by keeping the city from changing, limiting office construction, protesting new housing construction, and favoring zoning rules tied to growth restriction. There is an ill-conceived notion that limiting housing supply will somehow help cure the affordability issue. Growth restrictions are not only a local issue but also a national phenomenon. Fox refers to a study by Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of Cal-Berkeley that lowering regulation constraints on new housing in just San Francisco, New York and San Jose to the level of the median city would lift the gross domestic product by 9.5 percent! He also notes that land-use regulations are reducing economic mobility and driving up inequality.
Eric Jaffe stated in Business Insider that rents in San Francisco are so high that it is cheaper to commute from Las Vegas. His article discusses “super-commuters” who live far away from the job center, but are within a reasonable flight time. He goes on to make the case that even with the cost of round-trip airfare four times a week and daily BART fees, one could save $1,124/mo or $13,500 a year commuting from Las Vegas. Now that is mind-boggling!
By Tom Farrell, Director of Business Development