Places like Seattle, Austin, Washington, D.C., and Cambridge are endowed with large numbers of highly educated people. Thanks to sectors like software, biotechnology and IT, job growth has recovered from its pre-recession levels and home prices have also surpassed their pre-recession peak. Companies like Twitter and Facebook have had to raise salaries to keep their workers from moving to larger numbers of fast-growing and power-hungry startups. These brain hubs are prime models of economic development gone good and their fortunes have caused rent and home prices to skyrocket – not such good news for those not able to afford them.
Economist Enrico Moretti from the University of California, Berkeley famously showed that for each new innovative type-job created in a brain hub city like Seattle, five additional jobs are also created – not just in professional type occupations like law or medicine, but in nonprofessional jobs like service work (waiters, cashiers). “For each new software designer hired at Twitter in San Francisco, there are five new job openings for baristas, personal trainers, therapists and taxi drivers,” notes Moretti. This is a big deal – particularly when thinking to the soaring housing costs in San Francisco as written about here and here.
Coupled with the high costs of housing, zoning ordinances have gotten more stringent. For those of us not schooled in housing and urban sprawl, zoning ordinances define how property in certain geographic zones can be used – whether it be for residential or commercial purposes, and includes regulations on lot size, density and the height of building structures. Until recently, zoning did not have an impact of the amount of housing stock being built, but according to researchers Brink Lindsey from the Niskanen Center and Steven Teles from Johns Hopkins University, the increasing restrictiveness in zoning ordinances has resulted in an artificial boost to home prices. The reasoning is that ordinances limit the supply of housing while demand continues to rise, resulting in inflated home prices.
“As of 2005 the top 50 most productive metropolitan areas in…