Harvard Economist Ed Glaeser wrote an opinion piece in the New York Sun about the differences in housing affordability and other costs of living between Houston and New York.
New York is naturally more expensive than Houston because the geographical constraints force higher density development, which is more expensive to build. New York’s highly regulated land use and zoning process adds more constraints that exacerbate this problem. On the flip side, Houston has few geographical constraints and relatively loose regulation, allowing the market to allocate housing more efficiently. In conclusion, Glaeser recommends that New York could do much to improve affordability by loosening it’s many regulations.
NY Sun – Houston, New York Has a Problem
Why is it so much more expensive in New York? For one, supplying housing in New York City costs much, much more — for a 1,500-square-foot apartment, the construction cost alone is more than $500,000. Also, part of the reason is geographic: an old port on a narrow island can’t grow outward, as Houston has, and the costs of building up — New York’s fate, especially in Manhattan — will always be higher than those of building out. And the unavoidable fact is that New York makes it harder to build housing than Chicago does — and a lot harder than Houston does.
The permitting process in Manhattan is an arduous, unpredictable, multiyear odyssey involving a dizzying array of regulations, environmental, and other hosts of agencies. A further obstacle: rent control. When other municipalities dropped rent control after World War II, New York clung to it, despite the fact that artificially reduced rents discourage people from building new housing.
Houston, by contrast, has always been gung ho about development. Houston’s builders have managed — better than in any other American city — to make the case to the public that restrictions on development will make the city less affordable to the less successful.
Of course, Houston’s development isn’t costless. Like most growing places, it must struggle with water issues, sanitation, and congestion. For environmentalists who worry about carbon dioxide emissions and global warming, Houston’s rapid growth is particularly worrisome, since Houstonians are among the biggest carbon emitters in the country — all those humid 90-degree days mean a lot of electricity to cool off, and all that driving gobbles plenty of gas.
But Houston’s success shows that a relatively deregulated free-market city, with a powerful urban growth machine, can do a much better job of taking care of middle-income Americans than the more “progressive” big governments of the Northeast and the West Coast.
The right response to Houston’s growth is not to stymie it through regulation that would make the city less affordable. It’s for other areas, New York included, to cut construction costs and start beating the Sunbelt at its own game.