Housing Supply in the 2010s
53 Pages Posted: 15 Feb 2019
Date Written: February 14, 2019
Geographic patterns of housing growth in the United States result from the interaction of demand, density, and regulatory institutions. This paper presents a model of urban redevelopment in which opportunity costs and regulatory hurdles hinder the occurrence, timing, and density of redevelopment. Regulations may inhibit a land parcel’s redevelopment through costs, delays, constraints, or rent control, each of which is shown to affect potential redevelopment differently. Unlike in models of greenfield development, the local distribution of existing uses will be a key determinant in the response to a shock or regulation, and housing supply curves will have an inverted S shape. Nonparametric estimation of housing supply growth from 2012 to 2018 as a function of demand growth and density yields a residual growth surplus for each census tract. The tract-level surpluses can be aggregated by metro area, town, or density cohort to indicate the relative growth-friendliness of local institutions and unobserved conditions. Growth surpluses offer a summary of implicit local barriers to growth that is more detailed and robust than measured supply elasticities. At the jurisdiction level, growth surpluses are negatively and significantly correlated with some measures of regulatory intensity, notably the de jure density restrictions in the Housing Regulation Database of Massachusetts Municipalities.
Keywords: housing supply, residential construction, urban growth, zoning, land use regulation, rent, elasticity of housing supply, nonparametric estimation, institutions
JEL Classification: R12, R31
Suggested Citation: Suggested Citation