How the Suburbs Made Us Rich

"Urban-growth boundaries create a scarcity of land for homes, and, as Economics 101 tells us, scarcity raises prices.

...It seems clear that if the nation had continued to have a home ownership rate of 40 percent, middle-America would have considerably less wealth than it does today. The same goes for middle-Canada and middle-Europe. It is not surprising that nearly one-half of the total household equity in the United States, Canada, and Australia is in home equity.

How is it that home ownership has spread so widely? The principal reason is suburbanization: what critics pejoratively call “urban sprawl.” At the same time that households were becoming more affluent, suburbs sprouted up around all the cities in the United States, western Europe, Japan, Canada, and Australia. This is more than coincidence.

The new suburban housing was affordable because it was built on less expensive land by builders able to take advantage of scale economies from larger projects. There is a popular view that these suburbs were populated by people who fled the inner cities. That is true only to a limited extent. Even in the old industrial cities of the East and Midwest, more than 70 percent of new urban residents were from outside. Millions of people were moving from small towns and rural areas to take advantage of the economic opportunities that existed only in the larger urban areas."

Thanks to Preserving the American Dream listserv