Spatial Mismatch's Far-Reaching Effects

Dwyer Gunn takes a closer look at several recent and forthcoming research papers on increasing housing costs and the economic and job market effects. A new Urban Institute feature shows the outcome of spatial mismatch, where there are discrepancies between the location of workers and the location of employment opportunities, writes Gunn:

When rising rents drive workers to live too far from available jobs to apply for them, businesses and the economy suffer as well. It's not hard, after all, to imagine a coffee shop or restaurant that forgoes business, and economic growth, because it isn't able to hire the workers it needs to provide adequate customer service.

In urban areas where housing demand exceeds supply, developers would be expected to respond by producing more housing. However, this has not been the case, notes Gunn. "And while some regions do face geographic barriers (e.g. oceans) that can limit spaces to build new housing, most economists point to a policy choice—restrictive zoning and land-use regulations that effectively limit new building—as a significant driver of the housing-affordability crisis."

In addition to local and regional effects, research shows that these restrictions led to a 36 percent decrease in aggregate national growth between 1964 and 2009. And other research indicates that regulations have also resulted in fewer people relocating to high-productivity parts of the country, such as New York and California, which means economic growth is not resulting in the redistribution of people as it has in the past. 

These findings suggest a strong need for zoning reform, transportation improvements that can decrease commute times, and better quality low-wage jobs, concludes Gunn.