NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Housing Productivity and the Social Cost of Land-Use Restrictions

David Albouy, Gabriel Ehrlich

NBER Working Paper No. 18110
Issued in May 2012
NBER Program(s):   LS   PE

We use metro-level variation in both land and non-land input prices to test and estimate a housing production function and differences in local factor productivity. The econometric model implies that the typical cost share of land is one-third, and substitution with non-land inputs is inelastic. More stringent geographic and regulatory constraints increase housing prices relative to input costs. Disaggregated analysis finds state-level constraints are costliest, and provide a Regulatory Cost Index (RCI) independent of demand factors. Housing productivity falls with city population. The costs of land-use regulations outweigh associated quality-of-life benefits.

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This paper was revised on July 12, 2016

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Document Object Identifier (DOI): 10.3386/w18110

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