I’ve been mulling over some ideas recently from Harvard economist Ed Glaeser and others,* trying to figure out the best way to write about them. This little release (PDF) from Richard Florida’s Creativity Group gives me an excuse to start. It’s just a look at which metropolitan areas have been growing the most, nothing too complicated, but these kinds of numbers are used again and again to make the point that traditional cities like New York and San Francisco are losing ground to surging newcomers like Houston and Phoenix. Glaeser and his co-authors shed important light on what’s actually going on, in a way that has big implications for growth here in the Washington area.

What the new research does is introduce supply into the equation, pointing out that you often can’t have as much New York or San Francisco as you’d like. Why? Because older, denser cities have accumulated lots of regulations limiting housing construction. Newer cities (like Phoenix) or exurban parts of older cities (like the Washington area’s Loudoun County) have few such regs on the books, making new housing construction as easy as buying up land. A look at permit data from the Census Bureau is revealing. In all of 2006, San Francisco County issued new housing permits for 2,398 units. Arizona’s Maricopa County, by contrast, issued permits for 35,705 new units. The results aren’t difficult to predict; Phoenix continues to top lists of the fastest growing cities in the nation while San Francisco’s population barely moves.

But that doesn’t mean demand for San Francisco isn’t there. On the contrary, it’s at the heart of one of the most dynamic metropolitan economies in the nation. It shouldn’t be shocking to find, then, that SF’s housing prices are outrageous. The list of old, rich cities with tight development policies is practically identical to the list of areas with the most egregious housing costs. It isn’t that people don’t want to live in New York and Boston, it’s that New Yorkers and Bostonians have been constraining their own growth for decades and in the process have priced thousands of potential residents out of their markets. The same pattern holds here in Washington. Arlington and Alexandria have consistently been the stingiest jurisdictions with new housing permits, and they consistently have the highest median home prices in the area along with negligible population growth. Fairfax, Loudoun, and Prince William Counties have granted permits at near-Maricopa rates, on the other hand, and have had the population growth to go with it.

In recent years those counties have all reversed course under pressure from residents, issuing new permits much more carefully. Last year, Fairfax issued 70% fewer building permits than it did in 2004, while Loudoun and Prince William cut their 2006 rate in half over that period. Of course, when the papers covered subsequent drops in Census population estimates for those areas, the trend was painted as Northeastern-style stagnation. Nevermind that the Northeastern metroplex is–along with Northern California–far richer, far more productive, and far better educated than any other area of the country. If we ought to be deriding the Northeast for anything, it should be for closing off the economic potential it embodies to most Americans. Housing costs are the chief deterrent to those seeking economic opportunity in New York or San Francisco, and those housing costs stem directly from the difficulty in creating new supply.

* See this, for instance (PDF)