Smart Policy Can Lower Transportation and Housing Costs

Other Demos writers have been doing great work thinking about job quality, and ways to raise retail and service sector wages. I would like to broaden the focus a bit to include buying power, not just nominal wages.

Bigger paychecks are great, but bigger paychecks alone won't make people better off if the prices of their largest expenses are rising even faster. We need policies that increase nominal wages, but we also need policies that reduce the cost of living -- particularly housing and transportation costs.

A recent report from the Center for Neighborhood Technology found that in the 25 largest U.S. metros, moderate-income households are spending an average of 59 percent of their income on housing and transportation. One of the most disturbing examples in the report was the finding that in some Philadelphia neighborhoods, housing and transportation costs eat up as much as 90% of people's income.

If we could manage to reduce the average household's combined housing and transportation costs to, say, 40% of income that would be the equivalent of giving workers a huge raise, even if nominal wages stayed the same.

The key lever for bringing down housing and transportation costs is land use policy. Specifically, we need to reduce car dependence by building new housing close to where people work, and close to transit connections. We need multi-family housing like apartments and condominiums to become a larger share of America's housing stock.

Government policy, especially at the local and state level, has a big impact on what kind of housing is built and where. And unfortunately in most places, the policy mix tends to subsidize auto-centric development both directly and indirectly.

Everything from minimum parking requirements, to building height caps, to minimum lot size rules, to politicized approval processes for new development, all pushes in one direction -- overbuilding on the fringes of metros where land is cheap, and underbuilding in the central areas with good transit connections where land is expensive.

The pervasive tendency of the biggest most productive metros to underbuild on expensive land is a critical component of the wage stagnation problem, and it deserves more attention from progressives. The biggest metros feature higher wages and more robust service sectors than the sprawling low-density areas Americans have been moving to. There's a real opportunity to increase access to those higher wage service jobs if we can roll back some of the policies that are driving up the cost of living, and pricing out low and moderate-income people.