Development Regulations & Affordable Housing

1. Development Regulations & Affordable Housing Business Perspective Labor Supply Michael Carliner Newport Partners LLC May 22, 2007 mcarliner@comcast.net

2. Regulations: Impact on Business Regulations ↓ Housing Supply (Total/Type) ↓ Labor Supply (Total/Type) ↓ Operating Cost (and maybe Revenue)

3. Regulations: Impact on Business Regulations ↓ Housing Supply (Total/Type) ↓ Migration ↓ Metro Area Labor Supply (Total/Type) ↓ Operating Cost (and maybe Revenue)

4. Measuring Labor Supply Wage Rates Benefits Vacancies Costs for Recruitment, Training, etc Productivity

5. Measuring Labor Supply: Wages Workers care about real wages (adj for cost of living/housing) For employers, nominal wages are real cost Wages are higher in high-cost areas Mix Effect? Different Occupations,Skills (some unquantified) For high-skill jobs, probably higher productivity But what about other jobs?

6. Measuring Labor Supply: Vacancies Job Opening and Labor Turnover Survey (JOLTS) Beginning December 2000 National Data by Major Industry, Regions (4) Total Only Monthly Data Collected : Total Employment Job Openings (must be Vacant, Advertised, Immediate) Hires (added to payroll during month) Quits Layoff/Discharges Other Separations

7. Measuring Labor Supply: Vacancies Job Opening and Labor Turnover Survey (JOLTS) Interpretation/Analysis Still Preliminary—What does it mean? Many hires occur without vacancy Some industries always show high/low vacancies—not related to turnover or expansion No information by occupation, wage level Relationship to Unemployment Rate—Beveridge Curve Housing vacancy and search/match literature provides models for further analysis

8. Beveridge Curve: National 2001-2007

9. Beveridge Curve: Regions 2001-2007 YTD 2007 is lighter color

10. Measuring Labor Supply: Overdue Lots of data measuring ability of people to find jobs, little about ability of employers to find workers. Big question for the future—not just because of affordable housing. Impending, dramatic slowdown in U.S. labor supply growth Like U.S., many other countries adding job vacancy surveys. JOLTS doesn’t measure all dimensions of vacancies Other symptoms (e.g. recruitment/training costs) not quantified JOLTS sample includes: 16,000 Establishments (Universe = 8 million) 12 million employees So why no local data?

11. Determinants of Labor Supply Adjustment to Change in Labor Demand: Participation Rate Employment/Unemployment Rate Inter-area Commuting NET MIGRATION Blanchard-Katz (1992) “Dominant adjustment mechanism is labor mobility.” “By 5 to 7 years, the employment response [to a demand shock] consists entirely of the migration of workers.” Bartik (1993) “Migrants’ long-run share of the new jobs is 60% to 90%”

12. What DrivesMigration? Wages Employment/Unemployment Cost of Living/Housing Quality of Life Inmigration Drivers ≠ Outmigration Drivers

13. Migration Models Equilibrium Models Net Migration Incentives Eliminated House Prices Adjust Nominal Wages Adjust Unemployment Differences Persist Disequilibrium Models Migration Flows Respond to Labor Demand Housing Supply Adjusts Unemployment Deviations Short-lived

14. Housing in Migration Models Housing supply/cost often ignored or insignificant Housing Measurement/Specification Problems: Collinear with Quality of Life Inadequate local quality-adjusted data Proper housing cost measure? Rent Price Price/Income User Cost Marginal (Mover) vs Average (Nonmover) States/Regions aren’t Housing/Labor Markets

15. Migration Studies & Housing More Studies in Europe than U.S. Housing Effects Greater for Inmigration than Outmigration Effects may be Greater for Less Educated/Skilled/Wealthy

16. U.S. Migration: Berger & Blomquist 1992 County-level Migration 1975-1980 Individual probability of Moving from county Choosing destination County Demograhics, Wages, Qual-Adj Rents, QOL Rents not significant in decision to move out, Rent effect highly-significant on choice of destination

17. U.S. Migration: Potepan 1994 MSA Migration 1975-1980 Total Inmigration and Outmigration for 52 Metros Income, Employment Growth, Unemployment Rate, Climate, Pollution, Non-housing Cost of Living, Hedonic House Price Employment had only Significant Coefficients House price effect appears greater on inmigration than outmigration, but neither statistically significant (a point that Potepan seems to ignore) QOL Adjustments May Have Been Inadequate

18. U.S. Migration: Gabriel et. al. (1992) Census Division Migration 1980-81, 1986-87 Tried several house price measures: Average New Home Average Existing Home Quality-adjusted New Home – Best (Highly Significant) User Cost (w prior 3 yr chg) Monthly payment (w QA New Home) Other variables: Wage, Urbanization,Education, Unemployment Rate House Price more important for Destination than Origin

19. U.S. Migration: Frey & Liaw (2005) Interstate Migration 1995-2000 – individual records Logit model [a] Whether to move [b] Where (if mover) House price : Avg of state medians in 1990 and 2000 Other state variables: Employment Growth, Income, Unemployment Rate, Climate, Foreign Immigration Individual Characteristics: Age, Education, Race, Hispanic, Native/Foreign-Born House Price significant for Departure, Even More Important for Destination, BUT ONLY FOR NON-COLLEGE-EDUCATED

20. Annual Mobility Rates: U.S. vs E.U. 1990s average movers as share of population, from presentation by Géry Coomans to Joint US-EU Sep. 2002 Conference on Labor Markets in 21st Century

21. Migration Data: CPS Residence 1 year ago (and sometimes 5 years ago) Movers reported by whether same county, same state, same division, same region, moved from abroad. Also, current and previous state Previous metro not shown in microdata Wide range of demographic and employment data Only main reason for move collected

22. Primary Reason for Interstate Move Source: March 2006 CPS – Movers in past 12 mos. LIMITED TO THOSE IN LABOR FORCE

23. Migration Data: AHS Asks recent movers: main and other reasons for leaving previous residence, choosing current residence length of stay in previous residence location of previous residence (but answers are not reported) Asks all households when they moved in Nothing about work (e.g., no occupation, industry) Detailed housing costs and characteristics, allowing quality adjustment

24. Migration Data: IRS County-to-County Migration Based on Tax Return Addresses in Successive Years Number of returns ( ≈ number of households) Number of personal exemptions ( ≈ population) Total Adjusted Gross Income Median Adjusted Gross Income

25. Industry Effects Vulnerable Industries Labor Intensive Non-Profession/Lower-Skilled Jobs Basic/Export Industries Face Competition From Lower-Cost Metros Local Service Industries Can’t Move Out, But May Have More Low-Skilled Workers

26. Vulnerability: Labor Share & Labor Type

27. Vulnerability: Average Annual Wages

28. General Conclusions Disproportionate Effects of Regulations on Housing, Migration, Labor Supply for Less Educated, Less-Skilled, Lower-paid Population Difficult to Measure Labor-Supply Problems Housing supply and cost issues have greatest effects on potential in-migrants

29. Research Directions Develop/publish (or study through special access) job vacancies at local level Measure, through surveys, employer perceptions of labor shortages, and relate these to data on wages, vacancies, etc. Improve models of housing impact on labor force migration (with better quality-adjusted housing cost measures for metro areas)