In a recent Bloomberg column, Tyler Cowen discussed the difficulties in reorganizing the regulation:
The basic paradox is this: Government regulations are embedded in large, unmanageable and complex institutions. To dismantle it, or to reverse it significantly, will require a lot of state power – that is, state power. However, deregulation is critical of the state’s greater power, as it has the potential for more state regulatory measures. Think of it this way: If someone told a libertarian government expert that, in order to restore the state, it must first be given more power, he would probably run away screaming.
Tyler has been focusing on the federal government’s role in regulation, but a recent twitter thread Brian Hanlon shows the same problem at the state level:
Yimby’s efforts to promote housing continued on two separate fronts, deregulation and injunctions. To paraphrase Tyler, if you had asked me 5 years ago about local government housing mandates, “I probably would have run away screaming.”
I’m still not at all convinced that this is a good idea. But I can see the logic of this method. State governments are trying to deregulate the housing market, and local governments keep blocking their moves with more onerous regulatory hurdles. Mandates are clearly not the best first solution—it would be better if local governments put fewer barriers to housing. But directives are one tool that can force action on the issue.
For example, many regional governments participate in multiple funding sharing. One could imagine making the size of the land grant equal to the number of new houses being built. Because Nimby policies impose negative externalities on the entire state, the financial penalty of burdensome laws can force local governments to bear at least part of the cost of their barriers to new construction. This will direct them to policies that allow more home building.
To be clear, I’m not at all sure this will work in the real world. In states like California and Massachusetts, the state government may attach requirements that construction workers use union workers, or that a certain percentage of housing be “affordable”. When legislation enters the legislature’s sausage-making process, it rarely matches the ideal concept drawn up by policy wonks. Still, there are things in the world worse than housing affordability, and I suspect that some parts of the US already have it.
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