Land Use Regulations and Informal Land Use

Abstract

Land use controls make housing unaffordable by impeding housing supply. Consequently, we expect informal housing to become a more viable alternative. This paper uses a global sample of over 150 cities to investigate the impact of land use regulations on the proliferation of informal land use cover over time. Employing a spatial instrument, we show that one standard deviation higher regulatory stringency led to a doubling of informal land use cover in our sample of cities between 1990 and 2015. This estimated impact is driven primarily by highly regulated Chinese cities. Our findings indicate that unintended consequences of land use regulations stretch beyond formal housing and labor markets.

Keywords: Land use, regulations, informal