Full Citation

Title: Land Use Regulation and Housing Prices

Citation Type: Miscellaneous

Publication Year: 2019

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Abstract: Land use regulations cause local housing supply restrictions and raise local housing prices, as shown in a large empirical literature. If supply is restricted by local regulation, it is likely to cause a spillover of housing demand to other localities, depending on the regulation in the surrounding jurisdictions as well as demand. This spillover effect should reduce price rises in the locality imposing regulatory constraints, all else equal. In this paper, we test for the home community price effect resulting from regulatory spillovers which we identify as a general equilibrium effect. We develop a general equilibrium model with household choice on consumption and location and local housing production with empirical implications for which we test. Using property transaction data from 1993 to 2017 in California and a regulatory index compiled from the Wharton Residential Land Use Survey (Gyourko, Saiz and Summers, 2008), we structurally estimate and identify general equilibrium and partial equilibrium effects. Founded on the structural model, we derive a spatial measure of relative regulatory restrictiveness that allows us to separate the partial equilibrium effect from the general equilibrium effect in reduced-form analysis. We examine cities in Greater Los Angeles and find that the home regulatory and spillover effects are significantly positive and depend on city and property characteristics.

Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3363947

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Authors: Lin, Desen; Wachter, Susan, M

Publisher: University of Pennsylvania

Data Collections: IPUMS USA

Topics: Housing and Segregation, Land Use/Urban Organization, Methodology and Data Collection, Population Data Science

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