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The Impact of Local Residential Land Use Restrictions on Land Values Across and Within Single Family Housing Markets

Working paper #828
Joe Gyourko and Jacob Krimmel
The Wharton School, University of Pennsylvania & NBER

Using new data on vacant land parcels bought by builders for the purpose of single-family home development between 2013-2018, we estimate that restrictive residential land use environments have increased prices for a one-quarter acre lot with the right to build on it by over $400,000 in the San Francisco metropolitan area, by from $150,000-$200,000 in the Los Angeles, New York City and Seattle markets, and by just over $100,000 in the San Jose market. The same amount of land costs from $60,000- $80,000 more in the Chicago, Philadelphia, Portland (OR), and Washington, DC regions and is $35,000- $45,000 higher in the Boston, Miami (FL) and Riverside-San Bernardino metro areas. These magnitudes, which have been called ‘zoning taxes’ in the urban literature, reflect the difference between land values on the extensive and intensive margins. They are negligible to economically modest in a wide range of other markets including Atlanta, Charlotte, Cincinnati, Columbus (OH), Dallas, Deltona (FL), Denver, Detroit, Minneapolis, Nashville, Orlando and Phoenix. Our estimates also are strongly positively correlated with the new Wharton Residential Land Use Regulatory Index for 2018, which is increasing in the degree of regulatory constraint imposed in the underlying market. This relationship is not mechanically driven as the regulatory index is constructed from survey data that does not incorporate land or house prices in any way. Finally, our results are important inputs for future research into housing affordability, as well as how housing markets change in response to land use regulation.

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