NCPA - National Center for Policy Analysis

Land-Use Restrictions Reduce Affordable Housing

March 28, 2002

Affordable housing is less available in coastal areas of California and along the Amtrak corridor in the Northeast than it is in almost all other parts of the nation. No surprise there.

The reason, however, is less obvious. Economists lay much of the blame on land-use laws and regulations which abound on the two coasts -- and are far less intrusive inland.

In a new working paper for the National Bureau of Economic Research, Harvard University economist Edward L. Glaeser and Joseph R. Gyourko, of the University of Pennsylvania's Wharton School of Business, compared land and housing prices in the two areas and came up with some interesting conclusions.

  • Since construction costs do not vary that much nationwide, the difference obviously has something to do with land prices and land-use controls.
  • Constrictions on building ranging from zoning to the time it takes to get a permit raise costs by slowing down the process -- while limiting density makes it illegal to subdivide expensive land.
  • Those who already own their own homes have absolutely no interest in seeing affordable housing built around them, because they want the value of their own properties to rise.
  • Thus homeowners who are politically powerful in their local areas have every reason to favor a web of zoning controls that discourage subdivision of individual lots -- which might lead to high-density building and, thus, affordable housing.

So while the coastal strips of America become more hostile to development, the interior sections of the country remain amenable to it.

Source: Virginia Postrel, "Economic Scene: One Theory on Why It Seems Easier to Buy a House in the Nation's 'Red' Zone," New York Times, March 28, 2002; see Edward L. Glaeser and Joseph Gyourko, "The Impact of Zoning on Housing Affordability," Discussion Paper Number 1948, March 2002, Harvard Institute of Economic Research, Harvard University.


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