One of the most discussed aspects of cities of the United States in academic circles, especially among economists, revolves around the exorbitant cost of housing in places like Los Angeles and San Francisco. A recent study by Enrico Moretti and Chang Tai Hsieh has only confirmed these fears: restrictive zoning laws are costing the American economy a fortune. They conclude that over the last 50 years, adverse zoning laws have wiped out at least 50 percent of gross domestic product (GDP) in major American cities, costing every worker nearly $7,000 per year. By any account, this is a disaster.
Chang and Moretti’s study is not the only one that depicts the negative outfalls of zoning laws on economic growth, but it is probably the first time that a study has covered such a long time period. Even if one were to contest the figure of dollar losses, there is little doubt that zoning laws can adversely impact economic growth. Their study, like the innumerable others, is of interest since it applies equally well to Pakistan, where zoning laws have been singled out for the problems they create.
The 20th century witnessed mass migration of working age labour from agriculture into industry and services. In the US, the authors contend, this mass rural to urban migration lifted living standards of citizens over time. All this was made easier by affordable housing, complemented by friendly regulations. In other words, it was affordable housing that raised living standards and paved the way for social mobility across generations.
However, since late 1970’s zoning regulations have started to become increasingly restrictive. Elite groups have managed to capture large tracts of lands, managing successfully to resist any developments within its precincts or near it. In areas like Silicon Valley, these influential groups have lobbied to get high rises banned or disallowed. The end result is crippling house shortages, excessive rents and lower chances of social mobility. The excessive costs of living in these areas, largely driven by sky-high rents, means that qualified human capital finds it difficult to move into these cities.
State enacted laws don’t help either. For example, it just takes a simple appeal (the petitioner can remain anonymous) to halt high rise buildings, and the decision on those appeals can take a long time. Similarly, the California Environmental Quality Act has been used by interest groups to block development of new housing projects, besides adding to the cost of operations. Thus, not only do inefficient zoning laws reduce efficient land use - large tracts of land remain vacant - but also impede new investments. Lack of new investments means less jobs and less income generation. Moreover, they create labour shortages, as in San Francisco, because lower wage labour cannot afford to live in expensive places.
What I described above aptly fits the situation in Pakistan, where restrictive zoning laws have created huge problems in terms of how our cities function. Zoning laws in Pakistan basically run on an urban sprawl model. The results, as expected, are nothing short of a disaster. But to suggest that this is so due to ignorance of planners and policymakers would be rather ingenious.
There are powerful lobbies and interest groups in Pakistan whose interests is guaranteed by archaic zoning laws. These include big time land developers, elite housing societies, bureaucrats, generals and judges. For them, mixed use land development and vertical expansion does not offer the same financial benefits as horizontal expansion. Given Pakistan’s growing population, which exerts extreme pressure on land, and dearth of financially attractive investment opportunities, land is the most prized asset in terms of returns and ease of acquisition plus sale. This is complemented by a weak governance structure - legal and administrative - and non-recognition of housing as a basic right and limited availability of home financing options.
This bias towards horizontal expansion explains much of the predicament of mega cities like Karachi and Lahore, upon which much has been written. Karachi offers a vivid example. Given its status as a major economic hub, it has witnessed rural to urban migration since Pakistan’s inception. The stagnant zoning laws could not take care of the vast expanse of humanity converging upon this megapolis, resulting in underhand deals for land, ‘china cutting’ and exponential expansion of illegal slums. The result is a vast informal economy through which groups like Tehreek-i-Taliban Pakistan (TTP) find their succor rather than the money going to the national kitty.
While their lordships at Supreme Court may order demolition of illegal constructions in Karachi, but with utmost respect, it would achieve little. The real question is: why was there illegal construction in the first place and what role did zoning laws play in creating this situation? In asking this, their lordships would have unearthed much-needed answers.
Karachi and Lahore are not the only cities where zoning laws have tilted the balance against majority of Pakistanis. I grew up in Rawalpindi and now reside in Islamabad. These two cities used to be the envy of its residents and visitors, but now present a picture of mismanagement. Thanks to our zoning laws, Islamabad has almost intruded into Taxila and Murree, while Pindi is galloping towards Chakwal. This is good news for land acquisition and development agencies like Capital Development Authority (CDA) where chances to mint extra money comes from such expansion, but bad news for majority of citizens whose dreams of owning a house remains as distant as ever. Despite these expansions all around Pakistan, the estimated shortage of houses hovers between 9 to 10 million, which is a reflection of the utter failure of zoning laws and horizontal expansion.
The futility of these laws can be easily gauged by a paradox. I live in a federal government-run housing sector. Despite the severe shortage of accommodation, every street in this sector has empty houses. The same is true of all areas in Islamabad. The reason is that high cost of rent makes it unaffordable to most Pakistanis and those who do live on rent, life can be very tough since rent eats up a major portion of whatever they earn. Despite rents, basic amenities like water are hard to come by. In other words, this kind of expansion lowers the quality of life for most Pakistanis.
Another adverse impact comes in the form of little or no access to public transport. This compels millions like me to own a car - an expensive endeavor - since I have no access to public transport. And the dream of connecting every nook and corner of a city through public transport - an expensive undertaking - will remain elusive with this kind of expansion. Metro buses only cover certain areas. The one being built near my sector of residence is at such a distance that its comparatively advantageous to travel in a car. Lots of vehicles mean lots of congestion and pollution. Thus, the zoning laws propel horizontal expansion, making public transport impractical and imparting a huge expense upon citizens nationwide in the form of vehicles, congestion and pollution.
A worrying aspect in Pakistan’s context is the little intellectual effort towards pointing out these aspects. Leading writers on economics are infatuated with the same old, trite issues like fiscal and monetary policy, current account balance, etc., with rarely anybody venturing to study Pakistan’s ailing cities. There are exceptions, like Dr Nadeemul Haque, whose Vision 2030 and papers for Pakistan Institute for Development Economics (PIDE) contain excellent discussions on cities and their role. However, they remain exceptions rather than the norm.
I’ll conclude by stating that we need to recognize the important role cities and zoning laws play in economic development. Cities are engines of growth. That is why so many resources are devoted to their careful study. In Pakistan, we meander along aimlessly, which is the reason that our cities are becoming so problematic to live in.
Chang and Moretti’s study is not the only one that depicts the negative outfalls of zoning laws on economic growth, but it is probably the first time that a study has covered such a long time period. Even if one were to contest the figure of dollar losses, there is little doubt that zoning laws can adversely impact economic growth. Their study, like the innumerable others, is of interest since it applies equally well to Pakistan, where zoning laws have been singled out for the problems they create.
The 20th century witnessed mass migration of working age labour from agriculture into industry and services. In the US, the authors contend, this mass rural to urban migration lifted living standards of citizens over time. All this was made easier by affordable housing, complemented by friendly regulations. In other words, it was affordable housing that raised living standards and paved the way for social mobility across generations.
However, since late 1970’s zoning regulations have started to become increasingly restrictive. Elite groups have managed to capture large tracts of lands, managing successfully to resist any developments within its precincts or near it. In areas like Silicon Valley, these influential groups have lobbied to get high rises banned or disallowed. The end result is crippling house shortages, excessive rents and lower chances of social mobility. The excessive costs of living in these areas, largely driven by sky-high rents, means that qualified human capital finds it difficult to move into these cities.
State enacted laws don’t help either. For example, it just takes a simple appeal (the petitioner can remain anonymous) to halt high rise buildings, and the decision on those appeals can take a long time. Similarly, the California Environmental Quality Act has been used by interest groups to block development of new housing projects, besides adding to the cost of operations. Thus, not only do inefficient zoning laws reduce efficient land use - large tracts of land remain vacant - but also impede new investments. Lack of new investments means less jobs and less income generation. Moreover, they create labour shortages, as in San Francisco, because lower wage labour cannot afford to live in expensive places.
Horizontal expansion explains much of the predicament of mega cities like Karachi and Lahore
What I described above aptly fits the situation in Pakistan, where restrictive zoning laws have created huge problems in terms of how our cities function. Zoning laws in Pakistan basically run on an urban sprawl model. The results, as expected, are nothing short of a disaster. But to suggest that this is so due to ignorance of planners and policymakers would be rather ingenious.
There are powerful lobbies and interest groups in Pakistan whose interests is guaranteed by archaic zoning laws. These include big time land developers, elite housing societies, bureaucrats, generals and judges. For them, mixed use land development and vertical expansion does not offer the same financial benefits as horizontal expansion. Given Pakistan’s growing population, which exerts extreme pressure on land, and dearth of financially attractive investment opportunities, land is the most prized asset in terms of returns and ease of acquisition plus sale. This is complemented by a weak governance structure - legal and administrative - and non-recognition of housing as a basic right and limited availability of home financing options.
This bias towards horizontal expansion explains much of the predicament of mega cities like Karachi and Lahore, upon which much has been written. Karachi offers a vivid example. Given its status as a major economic hub, it has witnessed rural to urban migration since Pakistan’s inception. The stagnant zoning laws could not take care of the vast expanse of humanity converging upon this megapolis, resulting in underhand deals for land, ‘china cutting’ and exponential expansion of illegal slums. The result is a vast informal economy through which groups like Tehreek-i-Taliban Pakistan (TTP) find their succor rather than the money going to the national kitty.
While their lordships at Supreme Court may order demolition of illegal constructions in Karachi, but with utmost respect, it would achieve little. The real question is: why was there illegal construction in the first place and what role did zoning laws play in creating this situation? In asking this, their lordships would have unearthed much-needed answers.
Karachi and Lahore are not the only cities where zoning laws have tilted the balance against majority of Pakistanis. I grew up in Rawalpindi and now reside in Islamabad. These two cities used to be the envy of its residents and visitors, but now present a picture of mismanagement. Thanks to our zoning laws, Islamabad has almost intruded into Taxila and Murree, while Pindi is galloping towards Chakwal. This is good news for land acquisition and development agencies like Capital Development Authority (CDA) where chances to mint extra money comes from such expansion, but bad news for majority of citizens whose dreams of owning a house remains as distant as ever. Despite these expansions all around Pakistan, the estimated shortage of houses hovers between 9 to 10 million, which is a reflection of the utter failure of zoning laws and horizontal expansion.
The futility of these laws can be easily gauged by a paradox. I live in a federal government-run housing sector. Despite the severe shortage of accommodation, every street in this sector has empty houses. The same is true of all areas in Islamabad. The reason is that high cost of rent makes it unaffordable to most Pakistanis and those who do live on rent, life can be very tough since rent eats up a major portion of whatever they earn. Despite rents, basic amenities like water are hard to come by. In other words, this kind of expansion lowers the quality of life for most Pakistanis.
Another adverse impact comes in the form of little or no access to public transport. This compels millions like me to own a car - an expensive endeavor - since I have no access to public transport. And the dream of connecting every nook and corner of a city through public transport - an expensive undertaking - will remain elusive with this kind of expansion. Metro buses only cover certain areas. The one being built near my sector of residence is at such a distance that its comparatively advantageous to travel in a car. Lots of vehicles mean lots of congestion and pollution. Thus, the zoning laws propel horizontal expansion, making public transport impractical and imparting a huge expense upon citizens nationwide in the form of vehicles, congestion and pollution.
A worrying aspect in Pakistan’s context is the little intellectual effort towards pointing out these aspects. Leading writers on economics are infatuated with the same old, trite issues like fiscal and monetary policy, current account balance, etc., with rarely anybody venturing to study Pakistan’s ailing cities. There are exceptions, like Dr Nadeemul Haque, whose Vision 2030 and papers for Pakistan Institute for Development Economics (PIDE) contain excellent discussions on cities and their role. However, they remain exceptions rather than the norm.
I’ll conclude by stating that we need to recognize the important role cities and zoning laws play in economic development. Cities are engines of growth. That is why so many resources are devoted to their careful study. In Pakistan, we meander along aimlessly, which is the reason that our cities are becoming so problematic to live in.