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Housing Supply Restrictions Across the United States

Working paper #498
Raven E. Saks

Across the United States, there are a large number of local government regulations that have an effect on residential construction and the supply of housing. As the severity of these regulations varies across geographic locations, new residential construction is much more responsive to demand conditions in some areas as opposed to others. Because areas with stricter housing supply regulations cannot accommodate shocks to labor demand, the amount of new construction can impose limits on labor migration. The author investigates the effect of housing markets on local economic performance by estimating the elasticity of housing supply for individual metropolitan areas. These estimates reflect the degree of constraint on residential construction that is imposed by local government regulations. As a result of these regulations, places with a low elasticity of housing supply have experienced less migration and lower employment growth rates during the past two decades.

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