Housing, urban growth and inequalities: The limits to deregulation and upzoning in reducing economic and spatial inequality
Urban economics and branches of mainstream economics – what we call the “housing as opportunity” school of thought – have been arguing that shortages of affordable housing in dense agglomerations represent a fundamental barrier for economic development. Housing shortages are considered to limit migration into thriving cities, curtailing their expansion potential, generating rising social and spatial inequalities, and inhibiting national growth. According to this dominant view within economics, relaxing zoning and other planning regulations in the most prosperous cities is crucial to unleash the economic potential of cities and nations and to facilitate within-country migration. In this article, we contend that the bulk of the claims of the housing as opportunity approach are fundamentally flawed and lead to simplistic and misguided policy recommendations. We posit that there is no clear and uncontroversial evidence that housing regulation is a principal source of differences in home availability or prices across cities. Blanket changes in zoning are unlikely to increase domestic migration or to increase affordability for lower- income households in prosperous regions. They would, however, increase gentrification within prosperous regions and would not appreciably decrease income inequality. In contrast to the housing models, we argue the basic motors of all these features of the economy are the current geography of employment, wages and skills.