California home prices are 250 percent above the national average, while monthly rents are about 50 percent higher. The median price of a house in the Golden State exceeds $600,000.

This is not only a California problem. New research shows that extremely high housing prices in regions of the country hurt all workers no matter where they live.

Driven by innovations in finance, high tech, and biotech, New York, San Francisco, and San Jose have experienced some of the strongest gains in labor productivity during the past five decades. When labor productivity is dispersed geographically, both economic growth and aggregate output can be increased if some workers move from low-productivity areas to high-productivity areas. Even workers who do not move will benefit from the relocation because their salaries rise as competitors leave.

If barriers such as high local housing costs prevent workers from relocating to high-productivity areas, then output and incomes will be lower than they could be.

Economics professors Chang-Tai Hsieh at the University of Chicago and Enrico Moretti at the University of California, Berkeley, examined data on 220 metropolitan areas in the United States from 1964 through 2009 to see if labor is misallotted due to housing constraints, and if so, how much poorer workers are as a result. Their findings were published in “Housing Constraints and Spatial Misallocation” in the American Economic Journal: Macroeconomics in 2019.

The researchers concluded that growing variation in residential housing prices fuels growing differences in labor productivity across the United States. Strict zoning laws in some regions of the country create artificial housing scarcities that drive up prices, reducing the number of workers who can live in the most productive cities.

If the housing stock were increased in New York, San Francisco, and San Jose by relaxing land-use restrictions to the level of the median U.S. city, the growth rate of output would jump a stunning 36 percent, raising average annual incomes nationwide by nearly $4,500. With unlimited labor mobility, annual incomes across the country would increase by $10,680.

As it stands, a typical U.S. worker is losing out on tens of thousands of dollars during a career due to housing barriers in highly productive areas of the country. Hsieh and Moretti conclude that the “effect of more housing in Silicon Valley” would be “to raise income and welfare of all U.S. workers.”

Increasing the pace of housing development in California, however, is a challenge.

Abusive environmental lawsuits block housing construction in already-developed “infill” areas.

Zoning rules discriminate against multifamily structures.

Outrageously high and inconsistent local “development impact fees” and rigid building codes eradicate low-cost housing for low-income people, worsening homelessness. And rent controls, affordable housing mandates, union protections, and notoriously slow permitting cause housing entrepreneurs to flee California to build elsewhere.

Housing development in California involves a bewildering array of stakeholders and layers of government, each with an effective veto power, that has destroyed any notion of private property rights to land use. Untangling the Gordian knot of regulatory impediments seems impossible.

Despite much hand-wringing and pronouncements by California politicians to “fix the problem,” fewer residential building permits were issued in 2019 than in 2018. Given the growing human tragedy of homelessness and the vanishing dream of homeownership, the decline in permits is immoral. On the other hand, the best fix is not complicated.

California should adopt a “right to build” constitutional amendment allowing an individual or private entity to build, on private land, residential housing that complies with fire codes. Such an amendment would result in rapid housing development, dramatically lower housing costs, and a much deserved pay raise for all U.S. workers.