Housing Productivity and the Social Cost of Land-Use Restrictions
We use metro-level variation in land and structural input prices to test and estimate a housing cost function with differences in local housing productivity. Both OLS and IV estimates imply that stringent regulatory and geographic restrictions substantially increase housing prices relative to land and construction input costs. The typical cost share of land is one-third, and substitution between inputs is inelastic. A disaggregated analysis of regulations finds state-level restrictions are costlier than local ones and provides a Regulatory Cost Index (RCI). Housing productivity falls with city population. Typical land-use restrictions impose costs that appear to exceed quality-of-life benefits, reducing welfare on net.
Previously circulated as " Metropolitan Land Values and Housing Productivity." We would like to thank participants at seminars at the AREUEA Annual Meetings (Chicago), Ben-Gurion University, Brown University, the Federal Reserve Bank of New York, the Housing- Urban-Labor-Macro Conference (Atlanta), Hunter College, the NBER Public Economics Program Meeting, the New York University Furman Center, the University of British Columbia, the University of California, the University of Connecticut, the University of Georgia, the University of Illinois, the University of Michigan, the University of Rochester, the University of Toronto, the Urban Economics Association Annual Meetings (Denver), and Western Michigan University for their help and advice. We especially want to thank Morris Davis, Andrew Haughwout, Albert Saiz, Matthew Turner, andWilliam Wheaton for sharing data, or information about data, with us. The National Science Foundation (Grant SES-0922340) generously provided financial assistance. Please contact the author by e-mail at firstname.lastname@example.org or by mail at University of Illinois, Department of Economics, 1407 W. Gregory, 18 David Kinley Hall, Urbana, IL 61801. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
David Albouy & Gabriel Ehrlich, 2018. "Housing Productivity and the Social Cost of Land-Use Restrictions," Journal of Urban Economics, . citation courtesy of