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**JediReturns84** · 12-04-2006, 05:20 AM

Two points to consider:

1. Houston: I'm guessing the lack of zoning is the result of pressure from the oil & gas industry. They actually drill for oil in the city center, I believe. Can't imagine other cities will ever replicate this. Houston is first and foremost an oil town, asthetics have nothing to do with it.

2. NYC: Glaeser is absolutely right about restrictive zoning in Manhattan driving up prices citywide. Economists usually divide these types of distortions into "income" and "substitution" effects. The "income" part has been repeated often on this board: raising the cost of building housing results in less housing built, which then results in higher prices as there are more bids on the existing homes. This is certainly what is happening in NYC (to some extent) and in California (almost entirely). Look at Boston and San Francisco: why in hell are apartment prices so high there? Yeah, the economy is pretty good, but no Wall Street jobs like New York. But they both have super-restrictive zoning.

The substitution effect, on the other hand, might be a positive for New York. Namely, restictive zoning and higher prices in Manhattan leads to the gentrification of the outer boroughs. Put another way, if there were no zoning in Manhattan, the borough's population would eventually mushroom to something like 3 million, and the outer boroughs would be drained of middle class residents, who could now live in the old Manhattan apartments vacated by rich people (who just moved into the shiny new supertall apartment towers). Not so sure this would be a good thing.

12-04-2006, 05:20 AM	#16
JediReturns84 Join Date Oct 2005 Posts 455 Senior Member	Two points to consider: 1. Houston: I'm guessing the lack of zoning is the result of pressure from the oil & gas industry. They actually drill for oil in the city center, I believe. Can't imagine other cities will ever replicate this. Houston is first and foremost an oil town, asthetics have nothing to do with it. 2. NYC: Glaeser is absolutely right about restrictive zoning in Manhattan driving up prices citywide. Economists usually divide these types of distortions into "income" and "substitution" effects. The "income" part has been repeated often on this board: raising the cost of building housing results in less housing built, which then results in higher prices as there are more bids on the existing homes. This is certainly what is happening in NYC (to some extent) and in California (almost entirely). Look at Boston and San Francisco: why in hell are apartment prices so high there? Yeah, the economy is pretty good, but no Wall Street jobs like New York. But they both have super-restrictive zoning. The substitution effect, on the other hand, might be a positive for New York. Namely, restictive zoning and higher prices in Manhattan leads to the gentrification of the outer boroughs. Put another way, if there were no zoning in Manhattan, the borough's population would eventually mushroom to something like 3 million, and the outer boroughs would be drained of middle class residents, who could now live in the old Manhattan apartments vacated by rich people (who just moved into the shiny new supertall apartment towers). Not so sure this would be a good thing.
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