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Housing Regulation, Taxation and Population Growth

Wednesday December 29th, 2010   •   Posted by Emily Skarbek at 10:57am PST   •  

In a great post over at Economix, Ed Glaeser makes the point that the absence of disastrous housing regulation explains why states like Arizona and Texas have the highest growth rates in population.

“The future shape of America is being driven not by quality of life or economic success but by the obscure rules regulating local land use….Housing regulations, more than those that bind standard businesses, explain the Sun Belt’s population growth. If New York and Massachusetts want to stop losing Congressional seats, then they must revisit the rules that make it so difficult to build. High prices show that the demand would be there if the supply is unleashed.”

Randall Holcombe and Benjamin Powell have put together a comprehensive collection of arguments in the new book, Housing America, showing how housing regulations and the extensive and arbitrary involvement of the state in housing markets have caused problems such as dramatic shortages, lack of affordability housing and mortgage defaults.

I couple these insights on housing regulation with the fact that overall growth tends to occur where government regulation and taxes are the lowest. For instance, according to the census report:

“Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England…Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states.”

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December 2010