An interesting item comes to us from CNBC. Nicole Goodkind, Home Prices Push Low-Wage Workers Out of Cities, October 25, 2012 — click here.
Goodkind reports that Professor Daniel Shoag, the author of a study coming to us from Harvard’s Kennedy School of Public Policy, says:
“San Francisco and Boston are rich places, but people aren’t moving to those places any more. They’re moving to mid-wage places like Las Vegas and Phoenix and what’s happened is that the people moving to Boston tend to be high-skilled workers and the people moving out tend to be lower-skilled workers. That’s driven this differential in income and stopped this process of convergence.”
“Since 1980 the rate of income convergence has been stagnant. The average income of U.S. workers has remained flat for the past 30 years and the migration of low-skilled workers across states has also slowed significantly.
“This hasn’t always been the case. Between 1880 and 1980 low-skilled workers moved to wealthier states and the average incomes between states converged by an average of 1.8% per year.
“So why has the cost of housing changed so drastically in the past 30 years?
“An increase in land regulation in high-wage states and cities discourage development that would lower housing prices, says Shoag.”
Welcome to the club, Professor Shoag. Two Presidential Commissions on Housing reached the same conclusion years ago, and so has Dartmouth economics Professor William A. Fischel whose 1995 book Regulatory Takings, not only reached that same conclusion, but also demonstrated (using California as an example) how a high degree of land-use regulation accomplishes that. Bottom line: All the babble about how home prices are coming back and how great that is, is just that: babble. High housing costs are not good — they are bad, unless you happen to be an old timer who bought his home decades ago, or one of those comparatively few folks who bought their homes at the bottom of the post-bubble crash.
People who have to spend most of their incomes on maintaining a roof over their heads have that much less to spend on other things (and on savings for a rainy day), all of which detracts from the local economy. And when in these post-bubble days the mean home price reaches lofty levels of $300,000 (California) and $600,000 (Hawaii), that’s vey bad indeed.