I just saw “Meet Me in St. Louis” at the Muny a few weeks ago, so St. Louis at the start of the 20th century has been on my mind. Now MarketWatch has come out with a report saying that the Midwest in general, and St. Louis in particular, has long had the most affordable housing in America. The report goes back to 1890, and over that time period housing prices in St. Louis have only increased 6 percent more than inflation, which is an amazing statistic. Even in 1904, the Smith family spent a lot less money on their beautiful St. Louis home than they would have if they had moved to New York, like their overly ambitious dad wanted to.
There are several key reasons for St. Louis’s affordable housing; some are good, and some are bad. They all basically relate to supply and demand. We have long had plenty of supply in housing. Even when there was more demand to move to St. Louis, the city (and region) allowed enough housing to be built to meet that demand. However, over the past several decades, as Ness Sandoval has documented, demand to move to St. Louis has greatly diminished. The combination of a large existing housing supply, relatively low barriers to building new supply, and a lack of external demand to move here has resulted in the low cost of housing.
This has nothing to do with St. Louis’s status as an independent city. The report covers the region, not just the city. Baltimore is also an independent city not within a county, and just like St. Louis, it also has had a very high crime rate in recent decades. Its housing costs went up 477 percent relative to inflation.
I’ll let the readers debate the myriad reasons why there’s been an undeniable lack of demand to move to St. Louis over the past half-century (or more). Clearly, the region has many problems, and they’ve persisted for some time.
The explanations on the supply side are more straightforward. Wendell Cox wrote a paper for the Show-Me Institute on this topic. There are a few interrelated factors that keep housing costs down.
Back in the late 1800s and early 1900s, when there was a great deal of demand to live in St. Louis, the region built a lot of housing units to meet that demand. As demand and growth slowed substantially over time, that large housing supply was there to meet demand (in part). The MarketWatch article focuses a lot on this dynamic.
St. Louis local government is heavily fragmented into many municipalities and other taxing entities. There are downsides to fragmentation, but there are good things that come from it, too. One of the best things about our fragmentation is that it makes it harder for the region to agree on centralized plans that place too many limits on growth and burdens on builders. As a result, St. Louis has the most liberal zoning rules of any region in America. Hence, the region has continued to allow plenty of new housing units to be built in places like St. Charles County. This is, of course, a very good thing, and it is a key point in both Wendell Cox’s paper and my recent report.
It’s great that our housing is cheap, but it’s equally important that people actually want to live in St. Louis. The Smith family decided to remain in St. Louis due to the romantic entanglements of their teenage daughters and the looming opening of the World’s Fair. The World’s Fair strategy may have worked for the city in 1904. I don’t think we can count on it to keep people here again.
