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White House hopes looser zoning regulations will propel residential and economic mobility
Federal economists are targeting land-use restrictions, which they believe hurt the middle-class, reducing residential mobility. - photo by Daniel Bendtsen
Whats the cause of the great financial squeeze on the middle-class?

According to the White House, it could be as simple as land zoning.

Jason Furman, chairman of the White House Council of Economic Advisers, said in November that zoning regulations and other local barriers to housing development allow a small number of individuals to capture the economic benefits of living in a community, thus limiting diversity and mobility.

These artificial constraints are hurting residential mobility, he said, noting that areas of the U.S. with high land-use restrictions have higher inequality the type of inequality thats intergenerational.

For that reason, the White House is asking Congress to budget $300 million for local housing policy grants that can be used to incentivize localities to free up their land-use policies.

Residential mobility is commonly believed to improve economic mobility, especially for children, for whom a move to a more affluent neighborhood also means better schools.

And public policies have reflected this notion. By court order, Chicago intentionally began placing segregated public housing in nonblack neighborhood in the late 1970s under the assumption this would improve mothers employment and earnings, according to the Northwestern Journal of Law.

The success of the program led the Department of Housing and Urban Development in the 1990s to implement the Moving to Opportunity project that did improve housing conditions but failed to produce "detectable impacts on work, earnings, or other economic outcomes for adults," according to a government assessment of the program. Also, since the 1970s, the share of Americans moving each year has been on a steady decline, while economic mobility has been unchanged.

This counterintuitive disconnect caused Scott Winship a senior fellow with the Manhattan Institute, a conservative think tank, to examine the issue.

His research published last month found not all types of residential mobility have decreased, specifically the number of moves between birth and adulthood (and most likely between adolescence and adulthood) and moves across state boundaries.

So, while the median number of moves has declined, those who do move do it often. And the boost in income associated with those moves is as dramatic as ever.

Winships concern: Similar to income inequality in the U.S., theres a growing inequality of movement as certain disadvantaged groups, including the less educated and African-Americans, are less willing, or able, to move to economic opportunity.

Furthermore, Winship found that residential mobility has become more important for these disadvantaged groups than ever before.

But housing discrimination remains an obstacle for black families to relocate and improve their economic situation. The Atlantic recently reported that in Baltimore, race, not income, is the biggest determining factor to qualify for a home loan.

But as the White House economists focus on residential mobility, Eli Lehrer and Lori Sanders of National Affairs magazine propose another solution: perhaps policymakers should not encourage home ownership. The pair argues that the mortgage interest tax deduction, which costs the government $70 billion a year, may be politically popular but it is misguided and can restrict economic opportunity for many families.

Winship agrees. "By making homeownership cheaper than markets would dictate, we make it easier for homeowners to amass enough political power to block affordable housing development that would potentially affect their home values but allow lower-income people to move to higher-productivity areas," he said. "One incremental reform would be to simply cap the mortgage interest deduction, so that it benefits fewer people in high-housing-cost areas and makes NIMBYism less rewarding."
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