Blame Geography for High Housing Prices?

It’s become something of a mantra among urban economists: Increasingly unaffordable housing prices in cities like New York, London, and San Francisco are very often the consequence of onerous and out-of-date land use regulations. Whether it’s restrictions on the height of buildings or the density of development, these regulations effectively constrain the supply of housing. This year’s Economic Report of the President flagged such land use regulations as a major factor in skyrocketing housing prices and growing urban inequality. Another study I wrote about last year estimates that restrictive urban land use policies cost the U.S. economy around $1.6 trillion a year.

But something much more enduring than zoning and land use is also contributing to the deepening housing affordability problems of leading superstar cities and knowledge hubs. According to a recent study by Issi Romem, chief economist at BuildZoom, part of the explanation lies in the geographic characteristics of cities and metros—mountains, lakes, coastlines, etc.—that make it all but impossible to expand and add more housing.