The Effect of Zoning on Housing Prices

Reserve Bank of Australia Research Discussion Paper No. 2018-03

41 Pages Posted: 8 May 2018

See all articles by Ross Kendall

Ross Kendall

Reserve Bank of Australia

Peter Tulip

Reserve Bank of Australia

Date Written: March 8, 2018

Abstract

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

Kendall, Ross and Tulip, Peter, The Effect of Zoning on Housing Prices (March 8, 2018). Reserve Bank of Australia Research Discussion Paper No. 2018-03. Available at SSRN: https://ssrn.com/abstract=3149272 or http://dx.doi.org/10.2139/ssrn.3149272

Ross Kendall

Reserve Bank of Australia ( email )

65, Martin Place
Sydney, NSW 2000
Australia

Peter Tulip (Contact Author)

Reserve Bank of Australia ( email )

GPO Box 3947
Sydney, NSW 2001
Australia
61-2-9551-8831 (Phone)

HOME PAGE: http://www.petertulip.com

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