The Agenda

Matt Yglesias on Texas and Moving to Stagnation

Matt Yglesias argues that Texas’s relatively healthy economic climate is a function of the fact that homebuilding has continued there while it has stalled elsewhere:

The big East Coast metro areas are all richer than Houston, suggesting that something’s going right in the northeast. But DC, Philadelphia, and especially Boston were authorizing very little homebuilding during this period. By contrast, Houston, Dallas, Atlanta, and NYC are all acting like metro areas that want people to move to them. So in a sense, good for everyone! The places doing really poorly are places like Detroit that are neither rich nor growing. But from a national perspective, it’s a little perverse to have so many people moving to Dallas when the opportunities seem better in Boston or DC. These days most people work providing services to other people, so it’s generally advantageous to be providing those services someplace where incomes are high. But people can’t move to Boston, on net, if it’s not possible to build houses in the Boston area.

I agree with Matt: the lower regulatory barriers to building housing in Texas has made the state more affordable, and this in turn has attracted a large number of domestic migrants. The relative health of the housing market in Texas also presumably derives from the requirement that Texas homebuyers pay large minimum down payments. Dense coastal metropolitan areas tend to be rich in human capital, and they continue benefit from the historical accretion of various cultural and institutional amenities, as well as, in some cases, climate amenities. 

But I’d also add that low barriers to building housing are part of a broader political culture which shapes the policy mix. As William Voegeli has argued, the Texas model has other virtues that contribute to a relatively low cost of living in the state, though of course the Texas model is far from flawless: 

State and local government expenditures as a whole were 46.8 percent higher in California than in Texas in 2005–06—$10,070 per person compared with $6,858. And Texas not only spends its citizens’ dollars more effectively; it emphasizes priorities that are more broadly beneficial. In 2005–06, per-capita spending on transportation was 5.9 percent lower in California than in Texas, and highway expenditures in particular were 9.5 percent lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam. With tax revenues scarce and voters strongly opposed to surrendering more of their income, Texas officials devote a large share of their expenditures to basic services that benefit the most people. In California, by contrast, more and more spending consists of either transfer payments to government dependents (as in welfare, health, housing, and community development programs) or generous payments to government employees and contractors (reflected in administrative costs, pensions, and general expenditures). Both kinds of spending weaken California’s appeal to consumer-voters, the first because redistributive transfer payments are the least publicly beneficial type of public good, and the second because the dues paid to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.

It is safe to assume that our interlocutors on the center-left would disagree with Voegeli regarding the value of redistributive transfer payments, though one could argue that insofar as Texas achieves a higher labor force participation rate among less-skilled workers by virtue of its policy mix, the state has achieved success via a different approach.

I take it that Matt is saying that housing policy is the big driver here, and that restraining cost growth in public services and a light regulatory burden are less important. I certainly think that relaxing building restrictions in dense coastal metropolitan areas would represent a boon even if all other policies remained in place. Yet I think that the Texas model represents a set of policies that are, at their best, mutually reinforcing.

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