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Why the Tuition and "The Rent is Too Damn High"
August 13, 2012 - 9:15pm

The Rent Is Too Damn High by Matthew Yglesias

Published, March 2012
64 pages - $3.99 Kindle Single

Matthew Yglesias has zero to say about higher ed and the price of tuition in his excellent Kindle Single The Rent is Too Damn High.  

This oversight (doesn't everyone relate everything to higher ed?) should not stop us generalizing some of Yglesias' conclusions to our world.

Why is the rent too damn high? Why are house prices and rental costs so exorbitant in cities such as New York, San Francisco, Boston, Washington DC, Los Angeles, and Chicago?

The answer, of course, is supply and demand. The supply of homes for sale or for rent in cities with strong, high wage job markets is way below the demand for such housing.

Could it be that the high and rapidly growing cost of tuition reflects a similar imbalance between supply and demand?

The high cost of housing in the coastal cities and DC and Chicago is not a function of the costs to construct this housing. Building a house in Phoenix may be marginally cheaper than building a house in Brookline MA (my home town), owing to a larger immigrant labor supply. But the difference in construction costs account for only a tiny proportion of the housing price discrepancy.  Rather, it is the cost of land that drives the differences, again a function of supply and demand.

Yglesias' argument is that high housing cost cities have failed to build housing to meet demand due to excessive regulation. Many cities, such as Brookline MA, put severe restrictions on the number and type of apartment buildings that can be built. Height regulations, parking space regulations, minimum acreage regulations, and even outright bans on multistory dwellings limit the supply.   

Existing residents are often the most vocal proponents of zoning and regulation designed to limit the building of new housing units. Owners are worried about increased traffic, increased strain on local schools, and ultimately lower housing values if supply increases.  

Can we apply the logic of increasing the supply of spaces available in a high demand colleges as a route to lower costs? Highly selective institutions are reluctant to admit more students because a low acceptance rate (under 20%, or even below 15%) raises the school in the university rankings game.

But constructing a high quality postsecondary education experience is something like constructing a building.  Tall buildings can use elevators to make multistory living possible, and in higher ed we can utilize blended learning.  

Moving some of our instruction from face-to-face to online delivery, with no loss of intimacy or student centered learning, can allow us to better utilize our scarce classroom and lab space.  To the extent that classroom space is the limiting factor on increasing enrollment the development of online and blended learning can help us grow our student enrollments without any sacrifice in quality.

Increased enrollments should help us lower tuition costs for everybody, as the cost to educate each additional student drops at the margin.  

More slots available at the most selective institutions will in turn exert downward pricing pressure on less selective institutions, as they will be forced to become more productive to compete on price. And more spaces available at our highest quality universities may raise the quality of the education available across the board, as more institutions will be forced to compete on quality as opposed to lower barriers of entry.

The argument that Yglesias makes is that high housing prices in desirable cities is fundamentally a choice. High housing prices lower productivity, as smart and motivated people are unable to move to cities that contain industries and employers that they may hope to find employment in. Talented people who can't afford the high housing prices face the choice of dealing with long commutes or moving to places that offer diminished career opportunities.   

Are our choices within higher ed to limit admission slots beyond what is necessary to maintain educational quality also responsible (at least in part) for our high tuition costs as well?

What are you reading?


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