The Business Case for Urbanist Housing Policy

Housing affordability and urban development are more than social issues, for their core is economic in nature and is also a business matter.

The modern American city is built for limited housing supply. This limitation on housing supply, as noted in a 2018 American Economic Association study, is not only tied to inequality, affordability issues, and job distribution problems, but also less productive urban growth than could otherwise be possible, potentially hampering economic growth.

This potential reduction in economic growth is further backed in a 2015 work from the National Bureau of Economic Research. It is estimated that the heightened housing-supply constraints in cities like New York, San Francisco, and San Jose reduced aggregate U.S. GDP by 13.5%. This is a macroeconomic issue, then, as further economic growth waits to be harnessed.

Housing costs affect businesses in direct and indirect ways. When workers cannot afford to live near job centers, employers face a smaller labor pool, higher wage pressure, longer commutes, weaker retention, and greater difficulty filling essential roles.

More abundant housing can ease those constraints by expanding access to workers, increasing local consumer spending, and creating denser markets where restaurants, retail, healthcare, professional services, and small businesses can serve more customers in a smaller area.

Some industries may be cautious towards these ideas, such as the energy industry. This concern is understandable: more efficient land use and less car dependency can reduce fuel demand. However, urban productivity shifts the composition of energy demand and does not remove it.

Denser, more economically active regions still require reliable power, heating, cooling, construction inputs, logistics, petrochemicals, industrial capacity, and increasingly large electricity loads from data centers and advanced manufacturing. Energy firms should not treat housing abundance as a threat by default, but as a signal to adapt toward the forms of demand created by a more productive, electrified, and infrastructure-intensive economy.

Housing abundance and urbanism would not cut into margins, but would actually strengthen them for both the levels of individual businesses and for the economy as a whole. Firms should treat housing affordability as a workforce, market access, operating cost, broad economic, and growth issue, not just a social-policy issue.

Sources:

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.32.1.3

https://www.nber.org/system/files/working_papers/w21154/revisions/w21154.rev1.pdf