A new White House economic report indicates that the U.S. economy has been growing at its fastest pace in decades, but faces strong international headwinds and income inequality at home. Of note, the report specifically calls out local land use restrictions on housing as a major factor in holding the economy back, according to the AP report:
The advisers also made several recommendations to reduce income inequality, though many of them rely on cooperation from a wary GOP-led Congress as well as state and local governments.
For example, the Obama administration supports an increase in the minimum wage, which GOP lawmakers generally oppose. At the local level, the report said that that the expansion of state licensure requirements has made it harder for workers to switch jobs and that local land-use restrictions can constrain housing supply and make it more expensive.
This is a theme that Jason Furman, chairman of the White House Council of Economic Advisers, has been stressing since at least November, when he gave an extended talk on it [PDF] at the Urban Land Institute.
And there’s good reason to believe that local restrictions on housing are a major factor in income inequality, per the Wall Street Journal back in November:
One reason for the breakdown in [income] convergence, said Mr. Furman, is that only high-income workers can afford to relocate to those high-productivity cities that have tighter land-use regulations.
Of course, there are limits to what federal policy makers can do on an issue that’s largely handled by states and localities, a point readily acknowledged by Mr. Furman. In that sense, the latest policy discussion reflects an attempt to nudge cities and states to be more thoughtful in designing restrictions, just as an earlier push by White House economists this year has spotlighted the hazards of occupational licensing in hindering mobility.
The land-use and affordability issue isn’t just some idle worry of economists, Mr. Furman added.
“It’s something the president is personally concerned about,” he said.
I’m glad to hear that President Obama is focused on this issue, although as the article points out, the federal government has a limited role in these state and local matters. But shining a light on the problem is a good first step.