Opinion – Claudio Bernardes: Urban regulation, the economy and the reduction of inequalities

Inadequate urban policies and regulations can create important distortions in the operation of the real estate market, and jeopardize local economic growth, in addition to generating problems such as segregation, long travel times, deterioration of the quality of life, lack of housing and barriers to social mobility. .

In the most developed countries, the understanding is beginning to emerge that the sharp rise in housing prices and the consequent decrease in access to housing in metropolitan areas are the result of excessively restrictive zoning rules and regulations that increase the cost of real estate production.

Researchers at the London School of Economics in London, Michael Storper and Adrés Pose, argue that these restrictive policies in relation to housing production are increasingly seen as central to widening social and spatial inequalities on a national scale.

This connection, according to them, arises because local housing policies create barriers to the possibility of people from less dynamic regions moving to more dynamic regions. Housing, in this view, is no longer a local issue: it is central to debates about national growth.

There seems to be a consensus among scholars on this topic that in order to mitigate inter-regional distortions of opportunities within cities, reduce inequalities, and increase access to housing in more prosperous neighborhoods, it would be necessary to introduce zoning models that significantly increase the densification and areas intended for housing, in regions with the greatest supply of quality physical and social infrastructure.

Professor Cecile Gaubert from UC Berkeley, California, USA, argues that cities are undersized today because companies cannot capture all the potential gains of agglomeration for worker productivity, and this is because wages in large cities are inflated by costs. excessive costs of housing due to urban regulations. Thus, if the housing supply were to increase in the most suitable places, urban growth would involve skilled workers enjoying high urban wage premiums.

A more recent wave of research ventures into estimating how adequate, less restrictive regulation of housing supply affects population growth, the size of cities and income inequality.

According to Chang Hsieh of the University of Chicago and Enrico Moretti of the University of California, as housing construction decouples from regulation in thriving metropolitan areas, New York, for example, gains 787% in employment, while the employment base is multiplied. by five in San Francisco-San Jose. Housing deregulation, they claim, would generate $1.4 trillion in additional US GDP annually, through a combination of wage gains and shifting excessive rents to workers’ wages.

Thus, the evidence points out that adequate urban regulation on a regional scale would trigger the construction of new housing in the neighborhoods where skilled workers want to live. The production on a convenient scale of housing for higher-income families will prevent them from competing directly with low-income families for older and lower quality housing, allowing these families to move to regions with better infrastructure, in a process that can be successful for the materialization of the reduction of inequalities.