High-Speed Rail Can Solve Housing Shortages

(Bloomberg Opinion) -- America's most productive cities are notoriously short of housing. High home prices make it hard for people who aren't inherently wealthy to afford to live in cities like Boston, New York, San Francisco, Portland and Seattle. This problem is costly. The barrier to urban newcomers reduces total U.S. economic growth by 36 percent, recent research shows.

High-speed rail could help. That is, if America were more willing to embrace that form of transportation. Just this month, both the California governor and the U.S. president poured cold water on plans for a fast train from San Francisco to Los Angeles.

Yet trains running 200 miles an hour can connect people to jobs as much as 100 miles away from where they live, without their needing to suffer intolerably long commutes.

This has proved to be an enormous benefit for cities in China where fast trains have been built. My own research has measured the real estate price growth in medium-sized cities when they become connected to big cities by high-speed rail. The trains effectively move second-tier cities such as Tianjin and Suzhou “closer” to megacities such as Beijing and Shanghai.

Given the huge disparities in productivity across U.S. cities and the opposition to building significant quantities of new housing, fast rail transit is a feasible way to provide affordable access to jobs. Consider that the median home price in San Jose, California, is $631 per square foot, four times as high as that in Merced, which lies 100 miles away. If it were possible to commute at high speeds from Merced to San Jose, workers could have both good jobs and homes within their means.

A short high-speed rail line from Merced to San Jose would obviously be less expensive to build than one from San Francisco to Los Angeles, and the line could always be extended in the future. This would curtail costs while still triggering a construction boom that would create new opportunities, especially for relatively low-paid workers.

In China, my colleagues and I have found, high-speed rail has made academic researchers in second-tier cities more productive – by allowing them greater access to the superstar researchers who work in the bigger cities. Scientists who live within 150 miles – too close for a plane trip but too far for old-fashioned commuting – have gained the most from access to fast trains.

To be sure, high-speed rail is expensive to build. But the economic payoff can also be great. Fast trains allow people to work and play in big cities and still live somewhere they can afford.

To contact the editor responsible for this story: Mary Duenwald at mduenwald@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Matthew E. Kahn, the chairman of the Economics Department at the University of Southern California, will this summer become a Bloomberg Distinguished Professor in the Economics Department and the Carey Business School at Johns Hopkins University.