Digest

This episode of EconTalk features Brian Kaplan, author of "Build Baby Build," discussing the economic impact of housing regulation. Kaplan argues that government regulations, such as zoning laws and building codes, artificially restrict housing supply, leading to higher prices and a range of negative consequences. He challenges the common assumption that regulation protects the character of neighborhoods, arguing that deregulation can actually lead to more aesthetically pleasing outcomes. Kaplan also addresses the concern that deregulation would benefit homeowners at the expense of renters, arguing that renters can also benefit from increased housing supply and affordability. He advocates for specific policy changes, such as eliminating restrictions on building height and minimum lot sizes, implementing "by right development" to streamline the permitting process, and reforming parking regulations. Kaplan also discusses the potential of charter cities as a model for creating more free-market urban environments.

Outlines

00:00:00

Introduction and Housing Regulation

The episode begins with an introduction to Econ Talk and its host, Russ Roberts. Roberts announces an upcoming Econ Talk book club, where he and Tyler Cowen will discuss "Life and Fate" by Vasilie Grossman. He provides details about the book, including its length, complexity, and his recommendation for using the Kindle Edition. Brian Kaplan, a guest on the show, discusses his book "Build Baby Build," which explores the science and ethics of housing regulation. He argues that housing regulation is a major economic issue, affecting not only housing prices but also inequality, social mobility, and environmental issues.

00:02:23

Artificial Scarcity of Housing

Kaplan explains that the scarcity of housing in desirable locations is not natural but rather a result of government regulations. He argues that modern construction techniques allow for the creation of cheap, spacious housing in these areas, but governments often restrict such development. He discusses the "slippery slope" argument, which suggests that seemingly reasonable regulations can lead to a cascade of increasingly unreasonable restrictions. He uses the example of noise complaints against Reagan airport to illustrate how a system that welcomes complaints can lead to excessive regulation.

00:43:12

The Unseen Benefits of Deregulation

Kaplan draws on the work of Frédéric Bastiat to highlight the unseen benefits of deregulation. He argues that focusing solely on the visible negative impacts of deregulation ignores the potential for positive outcomes, such as the creation of better housing and infrastructure. He challenges the common assumption that homeowners are the primary opponents of deregulation. He argues that homeowners can actually benefit from deregulation in various ways, such as through increased property values, opportunities for upgrading, and the ability to keep their children closer.

00:55:17

The Challenge of Deregulation: Policy Choices and Implementation

Roberts raises the challenge of implementing deregulation, arguing that it's not simply a matter of turning a dial. He emphasizes the need for specific policy changes and discusses the importance of "by right development," which would streamline the permitting process for construction projects that meet established standards. Kaplan discusses the potential of charter cities as a model for creating more free-market urban environments. He highlights the example of Prospera in Honduras, a charter city that is attempting to implement a more open housing market. He also suggests that the privatization of federal and state-owned land could create opportunities for the development of new cities.

Keywords

Q&A

• What are the main arguments against housing regulation, and how does Brian Kaplan address them in his book?

  Kaplan argues that housing regulation artificially restricts supply, leading to higher prices and a range of negative consequences, including increased inequality, reduced social mobility, and environmental damage. He addresses common objections, such as the claim that regulation protects the character of neighborhoods, by highlighting the potential for positive aesthetic outcomes from deregulation.

• How does Kaplan explain the seemingly counterintuitive observation that tenants often oppose new construction?

  Kaplan suggests that tenants often lack awareness of the long-term benefits of deregulation, believing that it might actually worsen housing affordability. He also points out that tenants are often susceptible to concerns about potential negative impacts, such as increased traffic or noise, which can be amplified by special interest groups.

• What are some specific policy changes that Kaplan advocates for to improve the housing market?

  Kaplan advocates for eliminating restrictions on building height and minimum lot sizes, as well as for implementing "by right development" to streamline the permitting process. He also suggests reforming parking regulations and pricing to better reflect market demand.

Show Notes