Jue Insight: Making Housing Affordable? The Local Effects of Relaxing Land-Use Regulation

73 Pages Posted: 29 Feb 2024

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

Abstract

This paper examines the effects of relaxing land-use regulations on housing supply and rents at the local intra-city level. We apply a staggered difference-in-difference model, exploiting exogenous differences in the treatment timing of zoning plan reforms as identifying variation. Increasing the allowable floor-to-area ratio (FAR), i.e., upzoning, significantly increases the living space and housing units by approximately 9% in the subsequent five to ten years. This effect is stronger for larger upzonings and rasters where zoning is binding. Upzoning also has a positive spillover effect on the housing supply on adjacent rasters. Furthermore, upzoning leads to no difference in hedonic rent on upzoned and non-yet-upzoned rasters since the rent effect dissipates throughout the city. These results show that upzoning is a viable policy for increasing affordability. However, the effects depend on the upzoning policy design and take several years to materialize.

Keywords: Affordability, land-use regulations, zoning, densification, housing supply, rents

Suggested Citation

Büchler, Simon and Lutz, Elena Catharina, Jue Insight: Making Housing Affordable? The Local Effects of Relaxing Land-Use Regulation. Available at SSRN: https://ssrn.com/abstract=4742883 or http://dx.doi.org/10.2139/ssrn.4742883

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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