Do land use restrictions tend to increase income inequality?

A fine article by Laura Kusisto, “Land Use Rules Under Fire,” (Wall Street Journal, Oct. 19), asserts that a growing body of research suggests that land-use restrictions, including zoning laws, are increasing the costs of certain real estate developments, and thus increasing income inequality among all citizens.

 

This surprising conclusion compels one to study this research, and here are our findings.

 

In investigations to identify the causes of inequality, the pursuit of providing job opportunities for the poor has been a leading policy-making objective.

To achieve this aim, Daniel Shoag of Harvard University, and Peter Ganong, of the National Bureau of Economic Research, a non-partisan research organization, emphasize the importance of creating job opportunities for the poor.

Shoag and Ganong observe that a decade’s long declining trend in income inequality was reversed, roughly in the neighborhood of the year 2000, by their findings of a growing perverse trend in local land-use regulations.

It seems that authorities in historic communities, for example, where land is scarce, want to impose added space requirements upon home owners. More open space might be required in their yards to yield more light and air circulation on the properties. This tends to increase the cost of such land.

But how does this increase income or wealth inequality?

Shoag and Ganong explain that since these communities become more costly, the poor become increasingly excluded from them. This increases inequality, the argument continues, because by not being able to buy into such areas, the poor are also excluded from job opportunities these areas may provide.

Further, these jobs are springboards to better jobs and higher wages, and contribute further to reduced inequality.

There are several difficulties with this explanation.

One is that, while there may be enough truth in it to act as a tendency toward reduced inequality, it may be quite misleading if the existence of jobs is taken as being sufficient for individuals to win job contracts.

To make the mere existence of jobs sufficient to conclude a job contract, the limited-income job seeker must be reasonably educated, motivated to better oneself, with some skills and work experience to offer. These traits are of equal, if not of greater importance, than the mere presence of employment opportunities in making the individual’s transition to an improved economic future.

In other words, to make job opportunities effective, the job seeker must be prepared for the job.

Public policy makers could well devote much more attention to this issue.

A disproportionate amount of time, effort and public resources are devoted to making jobs available. But this is only one side of the coin, only a part of the problem: Much more thinking, study and resources could be devoted to helping those in poverty prepare themselves for jobs – which, surprise! – are much more available than the media would have us believe.

If the social concern is to reduce inequality, one of strongest steps we can take toward that aim, given that the maintenance of individual freedom of choice is a precious ideal, is to prepare the income-deprived person with the traits described above that will better match the qualities required by the job.

In other words, help prepare the individual for the many available job openings.

To consider the other difficulty with this thinking: While it may be justified to put limits on land use for other reasons – prevent obstruction of views or maintenance of esthetic qualities – the contention that restrictions requiring more backyard space, for example, tend to increase inequality of incomes is, for reasons just discussed, not very tenable.

It remains, however, one of the weakest arguments against such restrictions.

(The writer is a professor emeritus of financial economics at the University of Georgia. He lives in Aiken, S.C.)

 

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