Housing Constraints and Spatial Misallocation [pdf]
eml.berkeley.edu
eml.berkeley.edu
We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent re- strictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009."
New York (finance and business center) and Bay area (Silicon Valley) had a good start before others and started collecting people and companies around the country.
Without any data to back this up, I feel that much of the price inflation around the world housing markets is due to money flowing into the housing market that is fleeing countries, taxation or instability in general. Can anyone more knowledgeable refute this?
One 'solution' is property taxes, which disincentivizes buying property that you leave unoccupied. Planet Money had a good episode on the property tax and how it's a surprisingly effective tax.
This could be interpreted as a snide comment but it's the opposite: I strongly believe in regulation but could someone with an Austrian-economist bent explain why this doesn't happen?
My opinion would be the opposite. It seems to me that the laws that constrain building are, in part (not totally, obviously there are other bad motivations), trying to defend the area against what is basically a blind process of feedback.
It's not like the Bay Area is invincible. It nuked Boston's once-dominant 128 tech empire, but has been losing ground in the life sciences to Boston/Cambridge (and never made a dent in La Jolla).
My point is that classical economics says that if the Bay Area becomes overpriced (the cost of doing business exceeds benefits) then plausible alternatives will spring up.