The Amplifying Effect of Spatial Planning Restrictions on House Prices and Rents

Abstract

This paper empirically examines the impact of spatial planning restrictions on house prices and rents. Leveraging a comprehensive micro-level dataset, we investigate how building land reserves, density restrictions, refusal rates, and general regulatory constraints influence the responsiveness of housing costs to demand shocks. Our dynamic model reveals that stricter planning restrictions amplify the effect of demand pressures, increasing house prices and rents. Notably, this amplifying effect is stronger for house prices than rents. These findings contribute to the literature by providing a holistic view of spatial planning's impact on housing markets and offering actionable insights for policymakers aiming to balance housing affordability with sustainable growth.

Keywords: Spatial planning restrictions, zoning, upzoning, housing, prices, rents

JEL Classification: R1, R31, R52