Wisdom on Cities from Edward Glaeser
One of my favorite economists at Harvard is Edward Glaeser, who has done outstanding work on cities and on housing. Earlier this year, I gave a positive review of Conor Dougherty’s Golden Gates: Fighting for Housing in America. In that book, Glaeser is one of the heroes who recognizes that, as my title put it, the solution to expensive housing is more housing.
One reason I’m particularly fond of Glaeser is that he’s an activist. In my review, I wrote:
While many academics who come up with powerful results simply move on to the next interesting area, Glaeser believes in publicizing his results. Writes Dougherty, “He started blogging about housing costs and writing op-eds about housing costs and becoming the subject of various newspaper profiles where he called the advent of strict zoning the most important shift in the U.S. housing market since the adoption of the automobile.”
In Econ Focus, a publication of the Richmond Federal Reserve Bank, interviewer David A. Price, who generally does excellent interviews, does a nice interview of Glaeser.
Asked about the future of small towns after the pandemic, Glaeser says it’s a tale of two towns. The good news:
If you are a small town like a college town, a place with high levels of amenities and beautiful scenery where rich people want to go, I think that the combination of the ability to do work remotely and perhaps some enduring pandemic fears means that you are as strong as you’ve ever been, if not more so. These places are poised to benefit.
Take your Silicon Valley startup with 15 smart, hungry young people. Do we truly think in five years these people are just going to be Zooming it in from their suburban bedrooms? That sounds totally implausible to me. That sounds like a totally different work model that will lack all the energy and high quality in-person connections you get from being in the same room as one another.
But on the other hand, are these 15 people going to decide, “Well we all love skiing, we’re tired of paying Silicon Valley prices, should we relocate to Vail?” Or say, “We don’t want to pay taxes, let’s relocate to Austin.” Or, “We want better surfing, let’s relocate to Honolulu.” That feels entirely plausible to me. The technology supports the mobility en masse of these groups to some different area. Places they’re most likely to relocate to are high-amenity places that will appeal to them along one of these dimensions.
But, he continues:
On the other hand, if you’re talking about small towns in relatively low-amenity places, places that are low density, farmland, low levels of education, these places have been declining for decades, and I see little reason why the decline would be reversed anytime soon.
His answer on subsidies to housing came as a surprise, though. Glaeser says:
Take housing. You really don’t need to subsidize the production of low-income housing in most of Texas, because they have an unfettered market that does a great job of providing lots of low-cost housing to middle-income residents. If you have Detroit, you don’t want to produce more low-cost housing, because they’ve got an abundance of low-cost housing there. But on the other hand, there’s probably a good case for doing something about low-cost housing in San Francisco or New York or Boston.
That suggests to me, at least, that you want policies like the low-income housing tax credit that subsidizes new housing construction. You want that to be spatially limited. You want it to go in areas where there’s a genuine dearth of low-income housing. At the same time, you could have more housing vouchers in the areas where housing supply is elastic. You can have the right policy for the right place, which is something that America has traditionally found very difficult to do. But it’s just basic economics.
I would have thought he would recognize, based on his own excellent work, that the thing to do in San Francisco, New York, or Boston is what they are starting do in San Francisco, namely, allow more housing. To his credit, he does propose that later in the interview, but simply allowing more housing would likely be more effective than subsidizing low-cost housing.