How to Increase Housing Affordability? Understanding Local Deterrents to Building Multifamily Housing

Abstract

This paper studies how various zoning regulations interact to affect housing supply and affordability and which regulations policymakers should relax if they want to reduce housing prices. Using cross-sectional variation across space from novel parcel-level zoning data and a boundary discontinuity design at regulation boundaries in Greater Boston, we causally estimate the effect of various zoning regulations on the supply and prices of single- and multi-family homes. We find that relaxing density restrictions (minimum lot size and maximum dwelling units), alone or jointly with relaxing other regulations, is most effective at increasing supply, particularly of multi-family properties, and reducing rents and house prices. Conversely, enabling multi-family zoning or relaxing height regulations alone has little impact. In addition, our results suggest that the recent Massachusetts policy to increase building density near transit stations can increase housing affordability by reducing rents and sale prices in suburban municipalities.

Keywords: multi-family zoning, height restrictions, density, house prices, rents

JEL Classification: R21, R31, R58, H11, K25