Under the (neighbor)Hood: Understanding Interactions Among Zoning Regulations

Abstract

This paper studies how various zoning regulations combine to affect housing sup- ply, rents, and prices, and which regulations policy makers should relax if they want to reduce housing prices. Exploiting cross-sectional variation across space in novel parcel-level zoning data from Greater Boston and a boundary discontinuity design at regulation boundaries, we causally estimate the effect of various zoning regula- tions on housing supply, prices, and rents of single- and multifamily homes. We find that relaxing density restrictions (such as minimum lot size), alone or combined with relaxing other regulations, is most effective at increasing housing supply, par- ticularly of multifamily properties, and reducing per-housing-unit rents and prices. Our theoretical framework and results also suggest that zoning regulations affect per-housing-unit prices by changing housing characteristics and, in effect, increas- ing the size of the smallest housing unit available. Our counterfactual simulations imply that the recent Massachusetts policy to increase building density near transit stations can reduce rents and sale prices, particularly in suburban municipalities.

Keywords: multifamily zoning, height restrictions, minimum lot size, density, accessory dwelling units, house prices, rents

JEL Classification: H11, R21, R31, R58