Study: Urban land use policies costs U.S. economy $1.6 trillion a year

The research contends that more affordable housing options can help cities generate significantly more income.

May 19, 2015 |
Study: Urban land use policies costs U.S. economy around $1.6 trillion a year

San Francisco creates great wealth in the technology sector, but most of those gains go to pay for higher housing costs. Photo courtesy King of Hearts/Wikimedia Commons

Cities like New York and San Francisco give massive contributions to the nation’s overall economy, with 380 U.S. metro areas generating 90% of the total GDP in 2012.

But a new study found that these cities can actually be making much more—a hefty $1.6 trillion more, to be exact. So why isn’t this money being generated? The answer is the lack of affordable housing inventory in urban areas.

Economists Chang-Tai Hsieh from the University of Chicago and Enrico Moretti of the University of California at Berkeley have placed a price tag on restrictive urban land use policies, The Atlantic’s CityLab reports.

According to CityLab, Hsieh and Moretti’s research is the first of its kind to develop a “defensible estimate” of the costs constrained development, such as antiquated zoning and building codes, have on the U.S. economy.

The $1.6 trillion figure was extrapolated from an analysis on the economic contribution of 220 metros to the overall U.S. economic growth over more than five decades, supplemented with data on the characteristics of workers from the American Community Survey and the Current Population Survey.

What they found was that “too much of America’s urban economic power is simply being wasted on higher housing bills.”

CityLab has the full report.

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