The Local Effects of Relaxing Land Use Regulation on Housing Supply and Rents

44 Pages Posted: 11 Nov 2021 Last revised: 4 Dec 2021

See all articles by Simon Büchler

Simon Büchler

Massachusetts Institute of Technology (MIT), Center of Real Estate; University of Bern

Elena Catharina Lutz

ETH Zürich

Date Written: November 10, 2021

Abstract

We examine the effect of relaxing land use regulation on housing supply and rents at the local level. To this end, we develop a spatial equilibrium framework that compares a city with varying floor-to-area (FAR) restrictions. The framework shows that upzoning leads to higher local housing supply and lower rents across the entire city, with no difference in rents between upzoned and non-upzoned parcels. To bring our conceptual framework to the data, we use detailed geo-coded data from the Canton of Zurich in Switzerland from 1995 to 2020. Running changes-on-changes, doubly robust, staggered difference-in-difference, and geographically weighted regressions, we find that a 10% increase in zoning leads to a local 1.2% increase in housing supply in the subsequent five years. Furthermore, changes in zoning lead to a negligible difference in rents between upzoned and non-upzoned parcels, confirming the predictions of our framework. Thus, our findings show that upzoning is an effective policy for increasing housing supply, which, all else equal, leads to lower rents in the entire city. Keywords: Land use regulation, upzoning, housing supply, rents.

Suggested Citation

Büchler, Simon and Lutz, Elena Catharina, The Local Effects of Relaxing Land Use Regulation on Housing Supply and Rents (November 10, 2021). MIT Center for Real Estate Research Paper No. 21/18, Available at SSRN: https://ssrn.com/abstract=3960822 or http://dx.doi.org/10.2139/ssrn.3960822

Simon Büchler

Massachusetts Institute of Technology (MIT), Center of Real Estate ( email )

United States

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland
3001 (Fax)

Elena Catharina Lutz (Contact Author)

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

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