EHI studies interstate effects of regulatory barriers to housing affordability, and possible federal remedies for them (2017)


Regulatory barriers to housing growth and affordability in some of the nation's wealthier states are interfering with the ability of low- and moderate-income Americans to move into those states for better economic opportunities--according to a number of recent studies.EHI is examining whether Congress would have the authority to prohibit unwarranted state and local regulatory restrictions on housing supply ("exclusionary housing policies") that have interstate effects.


One major study indicates that a century-long trend of convergence in the average per-capita incomes of different States of the Union has slowed considerably since about 1980. Peter Ganong and Daniel Shoag, Why Has Regional Income Convergence in the U.S. Declined? National Bureau of Economic Research (NBER), Working Paper 23609 (July 2017). Among the evidence presented in that study is that:

  1. The tremendous housing price inflation in wealthier states since the 1970's is responsible for slowing that migration and convergence;
  2. The greater restrictions on housing growth in wealthier states since that time are strongly associated with that inflation; and
  3. Almost a third of the rise in economic inequality among American states since 1970 (when American incomes were, by historical standards, most equally distributed) may be accounted for by those trends.

Another major, recent study also indicates that land-use restrictions are a significant drag on economic growth in the United States. Chang-Tai Hsieh and Enrico Moretti, Housing Constraints and Spatial Misallocation (May 2017). Summarizing their findings, the authors have stated:

The creeping web of these regulations has smothered wage and gross domestic product growth in American cities by a stunning 50 percent over the past 50 years. Without these regulations, our research shows, the United States economy today would be 9 percent bigger — which would mean, for the average American worker, an additional $6,775 in annual income. 

Chang-Tai Hsieh and Enrico Moretti, How Local Housing Regulations Smother the U.S. Economy, New York Times, Sept. 6, 2017.

EHI recently has reviewed other findings that are consistent with that study. For example:

  • Ryan Avent, a correspondent for The Economist (London), shows in his new book, The Gated City (2011), that most of the growth in productivity and wages in the United States has come from rich Coastal metro areas such as San Francisco (e.g., Silicon Valley), Boston, and New York City. However, contrary to expectations (and historical patterns), more people have moved away from these flourishing areas than have moved to them. The best explanation for that phenomenon, Avent argues, is that entry into the regions with high productivity is gated by zoning, keeping individuals out and ensuring that the growing sectors are not able to add more workers.
  • Edward L. Glaeser, a leading housing economist, has highlighted the adverse effects on the national economy of the population trend away from the most productive states and metros and toward states with more affordable housing. (Edward L. Glaeser, Houston, New York Has a Problem, City Journal, Summer 2008, at 62, 67.)

See, e.g., David Schleicher, City Unplanning, 122 Yale Law Journal 1670, 1693-94 (2013). Also, The Atlantic magazine calculated in early 2014 that:

  • Many dense, high-income states are continuing to lose population, while many poorer states with plentiful land continue to add families; and
  • Numerous states with the most upwardly mobile cities (according to the Equality of Opportunity Project of Harvard Univ. and UC Berkeley) are seeing net emigration.

Derek Thompson, Why Americans Stopped Moving to the Richest States, TheAtlantic.Com, Jan. 10, 2014.

     Legal considerations

Congress may regulate a state or local policy that has harmful economic effects extending into other states, under the Commerce Clause of the U.S. Constitution. Also, a state or local policy that effectively prevents low- and moderate-income Americans from moving to that state arguably violates the Constitutional right of Americans to migrate freely from one state to another. Such a policy also may violate the individual right to equal protection of the laws.

In EHI's view, Congress may prohibit exclusionary housing policies in any or all states, if it concludes that those policies affect commerce in other states or violate individual Constitutional rights. Although we are not aware of any consideration of those interstate effects yet in Congress, and although there are complex questions as to what form of Congressional action might be advisable, potential authority seems to exist.