In the previous post I made the case that we need private infrastructure in the form of housing and office buildings for the same reasons we need public infrastructure such as roads, transit, schools, and water and sewer pipes. In particular, if we don’t have enough housing, workers will continue bidding up the cost of existing residences until only the very affluent will be able to afford decent housing in convenient locations. Lower-income residents will either be priced out entirely or face crowded, substandard housing conditions in remote locations with long and difficult commutes.

It may be possible to limit population growth by throttling the construction of new housing through regulation and higher fees on development (I’ll have more to say about development fees in a future post). The problem is that restrictive land use policies tend to hurt the poor and middle class while discouraging businesses from locating and expanding here, because their workers are squeezed by the high cost of housing. This might drive some people away and discourage others from coming in the first place, but it would do so only by raising the cost of living and degrading the quality of life of all but the wealthiest residents – not to mention weakening our tax base by reducing our economic competitiveness.

Along with roads, transit, schools and parks, the provision of housing sufficient to support a high quality of life at affordable prices is a fundamental building block of an equitable and sustainable economy.

We’ve seen what happens in other jurisdictions – the San Francisco Bay area comes to mind as the most egregious example – where jobs drive housing demand but supply doesn’t keep pace. In these jurisdictions, skyrocketing housing costs act as a virtual wall keeping out lower and moderate-income workers, creating a wealthy monoculture in neighborhoods with the best access to good jobs, strong schools, and convenient transportation. Montgomery County is a community that prides itself on its commitment to diversity and equity, so this isn’t a solution that our residents would – or should – support.

It might seem counterintuitive, but in addition to exacerbating inequality by keeping out the poor or forcing them into substandard housing far from employment opportunities, high housing costs are also bad for the economy because they drive out younger workers who are priced out of the market and then move to lower-cost areas, leaving behind older residents and a shrinking tax base. This phenomenon is already affecting the DC region, as we see increased net negative domestic in-migration (also understood as more people moving out than moving in):

If you doubt the relationship between housing costs and the decision of some residents to leave the area, consider this chart:

The DC region now has the highest cost of living in the entire US, and Richard Florida has made the point that housing costs are the main driver in cost of living differences. In the above chart, for example, you can see that the main difference in cost of living between Montgomery County and several other jurisdictions comparable in population is represented by housing – food and transportation costs don’t vary all that much. In other words, our high cost of living is almost entirely attributable to housing.

In the next post I will describe how new housing can not only meet the demand for more places for people to live but will improve the quality of life for both current and future residents while bolstering our economic competitiveness and tax base.