New Yorkers are rightly proud of their city's renaissance over the last two decades, but when it comes to growth, Gotham pales beside Houston. Between 2000 and 2007, the New York region grew by just 2.7%, while greater Houston — the country's sixth-largest metropolitan area — grew by 19.4%, expanding to 5.6 million people from 4.7 million.

The Southern city welcomes the middle class; heavily regulated and expensive Gotham drives it away. Housing prices are the most important part of Houston's recipe for middle-class affordability.

Houston's great advantage, it turns out, is its ability to provide affordable living for middle-income Americans, something that is increasingly hard to achieve in the Big Apple. That Houston is a middle-class city is mirrored in the nature of its economy. Both greater Houston and Manhattan have about 2 million employees.

If the key factor making Houston a middle-class magnet is its plentiful and inexpensive housing, that raises the question: why is it so cheap? The low cost of homes reflects the low cost of supplying homes in Texas. Building an "economy" 2,000-square-foot house in Houston costs about $120,000, and a slightly larger "standard" one about $150,000.

Why is it so much more expensive in New York? For one, supplying housing in New York City costs much, much more — for a 1,500-square-foot apartment, the construction cost alone is more than $500,000. The permitting process in Manhattan is an arduous, unpredictable, multiyear odyssey involving a dizzying array of regulations, environmental, and other hosts of agencies. A further obstacle: rent control.

But Houston's success shows that a relatively deregulated free-market city, with a powerful urban growth machine, can do a much better job of taking care of middle-income Americans than the more "progressive" big governments of the Northeast and the West Coast.


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