Why America should build new cities

Last week I proposed a 10-word Democratic agenda for financial freedom:

Treat cost disease, reduce the debt, and save Social Security.

Cost disease is when prices in a sector go up faster than overall wages, year over year. Housing and healthcare are most afflicted. Inflation is much higher in those two sectors than the overall economy, largely because they are labor intensive with low productivity growth.

You can read my Substack and Economist essays about how to treat cost disease for the middle class. It requires cutting regulations that drive up costs, promoting technology that takes out costs, and taking on special interests that keep prices high.

There’s a way to do all three in a big way: building new cities. I recently wrote about why and how America should build cities again with Jon Gruber, Chair of the MIT Economics Department. Here are excerpts from our essay in The States Forum, which ties building cities to treating cost disease in housing and infrastructure:

Housing, infrastructure, and all nature of public goods are nearly impossible to build and irrationally expensive when we do so…

This decade needs to deliver seven million units of housing and five Hoover Dams’ worth of nuclear power for America. We need radically new ideas…

This proposal starts with the enormous parcels of land currently owned by the federal and state governments that are not locally zoned. [For example], Two decommissioned military bases in Massachusetts—Fort Devens and Weymouth Naval Air Station in—are both within commuting distance of Boston…

Building new cities next to productive cities is the “have your cake and eat it too” of economic development. “Having your cake” is agglomeration. Adjacent hubs generate the interactions that drive innovation, which increases productivity, which boosts wages. “Eating it too” is affordability. A new city can build housing and infrastructure at the scale and speed necessary to produce enough supply to drive down costs…

Off-site construction of modular housing has the potential to reduce cost per unit, for the same quality. For the same reason that Ford can manufacture millions of cars for much less that it would cost you to build your own car, mass-producing housing units is cheaper per unit than stick-built, custom houses. Turning construction projects into manufactured products is an increasingly effective way to drive down costs. Construction productivity has declined in the United States since the 1960s, compared to an eight-fold productivity increase for manufacturing in the postwar era…

The opportunity to build new cities is not just economic. Starting fresh is a chance to challenge assumptions about how humans live together. One example is the relation of cities to cars. The best built environments were developed before the automobile age. (Think Paris.) For American cities, car-centric inertia, particularly over parking, is hard to shake. New cities can break from the status quo, implementing car-free zones, congestion pricing, Donald Shoup–style parking reforms, and superb cycling and walking infrastructure from first principles…

The lack of affordable housing anywhere near plentiful high-paying jobs has frustrated voters and hampered American growth. The Northeast, Pacific Northwest, and California have been particularly sclerotic. It’s time for a bold new approach that marries the availability of land outside of local control, and near productive urban areas, with reforms and investments necessary to build new cities.

Read the full essay here, which includes a deeper explanation of the economic theory behind new city development, as well as the financing tools and regulations to kickstart them.

In February, I joined The Ezra Klein Show to discuss the need for new city development and zoning reform.