Feds must intervene to set housing market free

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Scott Aitchison is one of several politicians in the running to lead Canada's opposition Conservative Party. And one of his big ideas is something that would never fly — but should — in America's Republican Party: federal action to deregulate the housing sector.

"We are facing a housing crisis in Canada," Aitchison tweeted recently. "We need URGENT action to fix this mess. It's time for big cities to say YES in my backyard to more housing."

Aitchison is not alone on the Canadian right. Conservative MP Raquel Dancho questioned the incumbent housing minister on land use regulation in Parliament on April 5, while interim party leader Candice Bergen said on April 7: "Canada's housing crisis can't be left up to municipalities to solve on their own. We need federal leadership to build more supply."

Pierre Poilievre, another leadership candidate, said that under his fiscal plans, "if they want more federal money, these big-city politicians will need to approve more homebuilding."

The Conservative Party's prescription is a good one.

Left to their own devices, localities tend to overweigh purely local interests in their land-use planning and don't approve enough new homes. This may help them avoid costs such as traffic jams and school crowding, but it imposes large economic costs on nonresidents. Meanwhile, people who don't move to where they otherwise would because there aren't enough homes don't just vanish — they live elsewhere, which makes the overall savings in terms of infrastructure illusory.

In Canada, as in the U.S., the federal government finances a fair amount of local government activity. So it makes sense to tie funding to new housing permits. If towns and cities want federal money for infrastructure, they need to do their share to add to the national housing supply.

In the U.S., this is considered a daring left-wing idea. Its main proponents in Congress are Rep. Jim Clyburn, D-S.C., and Sen. Cory Booker, D-N.J., whose 2019 HOME Act would tie Community Development Block Grant and Surface Transportation Block Grant money to land-use reforms. President Joe Biden endorsed a version of this approach during his campaign, and at one point it was part of his "Build Back Better" proposal. But it was dropped in congressional negotiations.

And such ideas have been the subject of a yearslong fearmongering campaign from the right. Former President Donald Trump spent much of the 2020 campaign warning that Booker had a plan to "abolish the suburbs." Earlier this month, while Canada's conservatives were pushing more density, Sen. Tom Cotton, R-Ark., went on Fox News to complain that Democrats "want to make us all poor. They want to make you live in downtown areas, and high-rise buildings, and walk to work or take the subway or ride an electric scooter, or whatever it is that Pete Buttigieg takes to work."

In terms of the culture war, it's easy to see where Cotton is coming from. American cities are full of Black people, LGBTQ people, immigrants and people who like art galleries and weird food. To many conservatives, that's not very appealing.

On the economics, however, Cotton could learn a lot from conservative friends north of the border. An apartment building is a more efficient use of land and material than a detached single-family home.

Consider an analogy: Walmart's large and efficient supply chain helps it offer "always low prices," which are appealing to lower-income people. But no self-respecting Republican — especially one, like Cotton, from Arkansas — would think that allowing Walmart to exist makes people poor. Walmart has a downscale customer base, so banning Walmart would be bad for low-income people. And ultimately it would be bad for everyone. Even fancy city snobs benefit in the long run from the existence of efficient retail operations that raise productivity.

By the same token, across large swaths of America — not just big cities, but college towns and places near mountains or beaches — land is more expensive than it is in Arkansas. Local prohibitions in those places on productivity-enhancing building types — duplexes, row houses, small apartments and, yes, the dreaded high-rise — make the country as a whole poorer.

That's not a question of what kind of lifestyle people ought to prefer, or about whether city dwellers or rural folks are more virtuous. It's basic economics, where prescriptive regulation imposes burdens on the economy. And with housing accounting for more than one-third of household consumption spending, regulatory burdens on the housing sector are a huge deal.

Not so long ago, this was conventional wisdom on the right: The reason New York and California were so expensive and losing people was because their economies were so overregulated. It's an idea articulated years ago by conservative Harvard economist Edward Glaeser.

It used to be difficult to get progressive-minded people interested in zoning reform, because talking about the virtues of deregulation smacked of right-wing politics. Books such as "Segregation by Design" by University of California, Merced political scientist Jessica Trounstine, which explore the role of overregulation in promoting racial inequality, have been useful in getting the left interested in the topic. Unfortunately, political entrepreneurs like Trump and Cotton have embraced the notion that if Booker and Clyburn think something is good for racial justice, they ought to be against it — even if the thing in question is good old-fashioned free market economics.

The correct lesson is that convergence between left and right to promote ideas that are broadly beneficial is possible. If federal action to discourage municipal overregulation is good enough for the Canadian right, it should be good enough for the American right too.