The Effect of Zoning on Housing Prices
Reserve Bank of Australia Research Discussion Paper No. 2018-03
41 Pages Posted: 8 May 2018
Date Written: March 8, 2018
Zoning regulations restrict housing supply and hence raise prices. This paper quantifies this effect by comparing prices to marginal costs in Australia’s four largest cities. For detached houses, marginal costs comprise the dwelling structure and the land that other home owners need to forego. Relative to our estimates of these costs, we find that zoning raises detached house prices 73 per cent in Sydney and by somewhat less in other cities. Effects on apartment prices are also substantial. The effect of zoning has increased dramatically over the past two decades, likely due to existing restrictions binding more tightly as demand has risen.
Keywords: housing, house prices, land prices, land use regulation
JEL Classification: R31, R52
Suggested Citation: Suggested Citation