Federalism and Housing Policy – Econlib

The Red-State Advantage in Housing Affordability May Be Shrinking

The Economist recently published an intriguing article suggesting that the traditional advantage red states have enjoyed in terms of housing affordability may be on the verge of diminishing.

Research by Edward Glaeser of Harvard University and Joseph Gyourko of the University of Pennsylvania indicates that new home construction in major sunbelt metro areas like Atlanta, Dallas, Miami, and Phoenix has slowed significantly, leading to higher housing prices. Additionally, California recently implemented reforms aimed at making it more difficult for NIMBYs (Not In My Backyard) to obstruct new housing developments, potentially paving the way for increased affordability in the state.

While it’s important to approach these predictions with caution, it’s worth considering the potential ramifications of this shift. Addressing regulatory barriers to home building is crucial, and simply easing one aspect of the process may not be sufficient to spur significant change. Despite recent reforms in California, challenges in the housing market persist.

If the affordability gap between red and blue states narrows significantly, the effects could be far-reaching. Higher wages and desirable living conditions in blue states could lead to a reversal in the trend of residents moving to red states. This shift could also challenge the narrative that red states are inherently better governed and more livable.

Recognizing the potential threat, some red-state governments, like Texas, have begun implementing pro-development policies to counteract the rise of NIMBY opposition and encourage housing construction.

Recent changes in tax policy, such as the increase in the SALT deduction limit, have impacted state-to-state competition. With housing policy emerging as a key factor in attracting new residents, states must consider the implications of their regulatory environments on population growth.

Despite its high taxes and regulatory burdens, California continues to draw residents due to its desirable living conditions. Texas, on the other hand, is taking proactive steps to address potential NIMBY challenges and ensure housing affordability for its residents.

Conclusion

As the landscape of housing affordability evolves, states must adapt to shifting trends and competition for residents. By addressing regulatory barriers and fostering a pro-development environment, states can position themselves to thrive in an increasingly competitive housing market.