Land use reform

Land use reform describes attempts to change legislation regulating dense housing construction in urban areas.

The problem

Laws at the local level in the United States and many other countries impose strict limits on how much total floor area can be built on a plot of land. Such zoning laws constitute a major obstacle to the construction of dense housing. The resulting increase in housing prices reduces economic efficiency by creating significant deadweight loss; increases inequality by transferring wealth from renters to landowners; and reduces both wages and total economic output by preventing workers from relocating where they can be most productive.

The effects of zoning laws on housing prices can be estimated by comparing the sale price of housing to the associated costs of land and construction.^[1] Open Philanthropy has combined these estimates with rent data and some additional assumptions to conclude that the aggregate "tax" on renters in five large metropolitan areas amounts to over $100 billion in deadweight loss per year.^[2]

A study by economists Chang-Tai Hsieh and Enrico Moretti examines the costs resulting from the reduced flow of workers to more productive regions within the United States due to rising housing prices. The authors conclude that land use restrictions depress annual U.S. wages by $1.27 trillion and output by $1.95 trillion.^[3]^[4]

If land use restrictions create these problems, why do they persist? In part, the costs of restricting land use in a given location are incurred by workers who would benefit from moving to that location, and who as such do not yet live there. Since restrictions are created at the local level, they are insensitive to the interests of these workers, who do not vote in those jurisdictions. Other costs of restricting land use—such as reduced economic output—are dispersed across society as a whole. Public choice theory explains why governments neglect these costs and instead focus on the concentrated benefits to landowners—even if, in the aggregate, the costs vastly outweigh the benefits.

Possible solutions

Open Philanthropy and 80,000 Hours have proposed a number of solutions to the problems caused by land use restrictions, which are quoted below.

Policy options

Promising options open to policymakers include the following:^[2]

"Local governments in high-wage high-regulation metropolitan areas could simply 'upzone', permitting more and denser development."
"Local governments could change the process by which they decide how to regulate land use. For example, they could adopt a 'zoning budget' targeting an overall level of housing growth, so that restrictions in one area would have to be balanced by expansions elsewhere. This would help align incentives of advocates for individual projects to support greater overall growth."
"Decision-making in land use policy could be re-assigned from local to regional or state authorities, which would likely be less susceptible to neighborhood pressure to oppose new development."

Funding options

Promising options open to funders include the following:^[5]

Fund existing local groups, such as YIMBY Action, California YIMBY or Open New York, or potential new groups in key housing markets.
"Fund a campaign to move land use decision-making power from the local to the regional or state level. We are not aware of any existing arrangements of this form in the United States, or of any active efforts to promote them, so this would likely be an exercise in 'active funding.'"
"Support the development of a policy consensus (for example, by convening conferences or sponsoring work on this issue in prominent think tanks). This would have the benefits of both encouraging coordination on this issue by policymakers, and improving our understanding of what policy changes are most likely to be beneficial."

Open Philanthropy has explored some of these and other funding options; as of May 2022, it has granted over $11.3 million to organizations working on land use reform.^[6]

Career options

Promising career options include the following:^[7]

"Become a researcher on cities and urban policy in academia or a think tank."
"Become a politician at the local or state level and support land use reform."
Become a public intellectual and raise awareness and concern for land use reform.

Direct work options

Promising direct work options include the following:^[7]

Vote for or contact local candidates who favor dense housing, and federal candidates who favor moving land use decisions to the city or state level.
Volunteer for a local advocacy group.

^{^}
Glaeser, Edward L., Joseph Gyourko & Raven Saks (2005) Why is Manhattan so expensive? Regulation and the rise in housing prices, Journal of Law and Economics, vol. 48, pp. 331–369.
^{^}
Open philanthropy (2015) Land use reform, Open Philanthropy, March, section 2.1.
^{^}
Hsieh, Chang Tai & Enrico Moretti (2019) Housing constraints and spatial misallocation, American Economic Journal: Macroeconomics, vol. 11, pp. 1–39.
^{^}
Hsieh, Chang-Tai & Enrico Moretti (2017) How local housing regulations smother the U.S. economy, The New York Times, September 6.
^{^}
Open philanthropy, Land use reform, section 2.2.
^{^}
Open Philanthropy (2022) Grants database, Open Philanthropy.
^{^}
Wiblin, Robert (2016) Land use reform, 80,000 Hours, April 14.

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