What is the Relation between Land Use Controls and Housing Prices?

Abstract

A comprehensive literature tests the effects of land use regulation on housing supply. Most empirical studies find that regulation increases prices and decreases construction levels. Several papers also find a negative relation between regulation intensity and price elasticity of supply. However, we show the share of land available for development is unrelated to the elasticity of housing supply in the standard urban model. By affecting available land share, regulation raises the level of housing prices and reduces production, but does not change supply elasticity. These results suggest testing for the effects of regulatory or topographical constraints on housing supply should be in levels rather than elasticities.