Must-read: Derek Thompson: “How American Cities Can Make America Great Again”

Must-Read: Derek Thompson: How American Cities Can Make America Great Again: “Even if the federal government were a monarchy…

…some of the most significant policy decisions happen at the local and state level, where federal power holds little sway. The president cannot force richer cities to raise their minimum wages above the national minimum, nor can the executive branch alone force states to spend more money on poor neighborhoods’ public schools. But perhaps the best example is America’s housing policy. As much as tax policy or defense spending can shape the economic fortunes of families and generations, people are not just products of the District’s mandates. They are also products of local geography—which is determined city by city, and block by block….

Several major cities have missed out almost entirely from the recovery. In Detroit, Memphis, and Toledo, the number of businesses declined between 2010 and 2013. In Cleveland and Cincinnati, total employment shrunk as well. In other cities… the recovery has been so frothy that the housing market is back to its pre-crash highs…. Austin, Buffalo, Denver, Honolulu, Nashville, Pittsburgh, [and] San Francisco. In three other metros, prices are within 5 percent of their all-time highs: Durham-Chapel Hill, Houston, [and] San Jose…. The return of record-high home prices in metros rich with new college grads is both an achievement and a warning. It’s an achievement, because there is a strong relationship between long-term growth and cities that assemble smart people…. But it’s a warning, too, because long-term growth requires that those people can afford to stay in the city….

There are some good reasons why expensive cities tend to be on the water. It’s hard to builds apartments on the ocean. But restrictive housing policies—for example, height restrictions and rules prohibiting the construction of new homes or multifamily housing— are a man-made tax on agglomeration, pricing smart people out of places they want to live and the places where they could best work. This, in turn, deprives some cities of the very job multiplier that Moretti hailed…. This isn’t a concern on the level of a city, but of the nation as a whole…