Over the past several years, a growing chorus of urban economists has decried the way that NIMBY sentiment, an acronym for “not in my backyard,” keeps urban housing prices unnecessarily high. Traditionally, the presence of NIMBYs was a sign of a healthy community: These were concerned residents who were motivated to keep “bad” things, like prisons or waste treatment plants, out of their neighborhoods. But NIMBYism has grown substantially over time, and it now erupts in opposition to all manner of new development. This behavior isn’t just selfish; it’s destructive. By limiting density and clustering, NIMBYs hold back the urban innovation that powers growth.
That’s why I prefer to call them the New Urban Luddites instead of NIMBYs, which sounds more benign. The original Luddites, named after their semi-mythical leader, Ned Ludd, took hammers to the weaving machines that were taking away their livelihoods during England’s Industrial Revolution. Over the course of the next century, ironically, those factories would lift living standards to higher levels than the Luddites could have ever imagined. The original Luddites, at least, were poor. The New Urban Luddites aren’t exploited workers, but some of the biggest winners of winner-take-all urbanism.
This New Urban Luddism is codified in the enormous and complex thicket of zoning laws and other land use regulations that restrict the supply of housing in many cities. While that may not have been their original intention (much urban zoning began as an effort to keep noxious industrial operations a safe distance away from housing), when taken together, these regulations have a substantial negative effect on the economy, adding up to more than a trillion dollars a year, or nearly 10 percent of GDP, according to one estimate.
The New Urban Luddism does not just limit the construction of new homes and apartments; more troublingly, it also puts an artificial cap on the further development and expansion of entire cities. Schools, sewer lines, electric power grids, and, even more importantly, the transit and subway lines required to move people around get much costlier to develop as a place grows bigger. Most troublingly: In places like the Bay Area, the Luddites are the ones imposing restrictions on the location of high-tech start-ups—limiting the development of industries that ultimately help to power growth. If populism and Trump reflects the anti-urban backlash of the right, such attempts to limit high-tech development in urban centers reflects an anti-urbanism of the left.
This is why there are so few New Yorks and Londons to begin with. In many aspiring cities, New Urban Luddites effectively limit and block the investments required for such scaling. Less scaling means less clustering; less clustering means lower levels of innovation and productivity. This, in turn, means lower economic output and smaller tax bases, which further constrains the ability of these cities to invest in urban development and to expand their redistributive policies and programs.
This New Urban Luddism reflects what economists refer to as rentier or rent-seeking behavior. An economic rent is essentially an extraordinary return that comes about through little or no real effort. And what could be easier than sitting on property and watching its value go up, especially since the gain comes largely from what is going on in the city and neighborhood?
Concern over unproductive rentier behavior hearkens all the way back to 18th-century economists, who were writing at a time when land, not capital, was the dominant factor of production. Today’s urban rentiers have more to gain from increasing the scarcity of usable land than from maximizing its productive and economically beneficial uses. The end result is the rise of what The Economist’s Ryan Avent has dubbed the “parasitic city,” in which wealthy homeowners and landlords capture a disproportionate share of economic output and wealth. Or as Noah Smith scathingly put it, “It’s landlords, not corporate overlords, who are sucking up the wealth in the economy.”
There’s no doubt that the New Urban Luddism of today’s cities is a big contributor to the New Urban Crisis. Yet this does not mean that the solution is to simply rid our cities of all land use regulation. Certainly, there is much that can and should be done to limit NIMBYism and to streamline outdated land use restrictions. But the basic notion, advocated by the growing chorus of so-called market urbanists, that we can make our cities more affordable, more equal, and more productive simply by getting rid of existing land use restrictions is one of those ideas that is too good to be true. On the one hand, the high cost of land in superstar neighborhoods makes it very hard, if not impossible, for the private market to create affordable housing in their vicinity. Combine the high costs of land with the high costs of high-rise construction, and the result is more high-end luxury housing, and very little, if any, of the truly affordable housing these superstar cities need.
On the other hand, there is a tipping point where too much density can actually deaden neighborhoods. The world’s most innovative and creative places are not the high-rise canyons of Asian cities but the walkable, mixed-use neighborhoods in San Francisco, New York, and London. What our cities need is not just deregulation, but a reformed land use system that, together with broad changes in the tax system, increased investment in transit, and a shift from single-family homes to rental housing, can help create the kinds of density, clustering, and talent mixing that the urbanized knowledge economy requires.
This brings us face to face with both the central element of the New Urban Crisis and the central contradiction of contemporary capitalism. The clustering force is at once the main engine of economic growth and the biggest driver of inequality. The concentration of talent and economic activity in fewer and fewer places not only divides the world’s cities into winners and losers, but ensures that the winner cities become unaffordable for all but the most advantaged. This unrelenting cycle is great news for wealthy landlords and homeowners, but bad news for almost everyone else.
This article is adapted from The New Urban Crisis: How Our Cities Are Increasing Inequality, Deepening Segregation, and Failing the Middle Class—and What We Can Do About It.