Connect with us

Hi, what are you looking for?

Assets Under ControlAssets Under Control

Editor's Pick

Land-Use Regulations Make Housing Less Affordable

Jeffrey Miron and Jacob Winter

US housing prices have risen faster than income since 2000, making housing less affordable. 

The solution is more housing, and the question is, what is holding that back? Recent research (Cato Research Brief no. 424) finds that land-use regulations have made construction firms less productive: 

The likelihood that a project is approved decreases as its size increases. Thus, regulation causes the average project size to shrink as entrepreneurs pursue a smaller project scale for a higher probability of receiving a permit .… As firm size shrinks, so do incentives to invest in technology. The overall productivity of the industry consequently declines. 

Indeed, the authors present evidence that: 

areas with stricter land-use regulations … have smaller and less productive construction firms. [Moving from] Atlanta’s [to] San Francisco’s regulatory strictness is associated with a 12 percent reduction in total revenue per firm and a one-third reduction in the share of employment in large firms. 

Ultimately, their findings reveal: 

much less residential and nonresidential construction activity in areas with stricter land-use regulations. 

This research adds to the growing evidence that relaxing land-use regulations is the most effective way to expand housing supply and increase affordability. For example, local governments should allow more multi-family developments.

This article appeared on Substack on March 15, 2025.

You May Also Like

Editor's Pick

Clark Packard and Alfredo Carrillo Obregon For nearly 60 years, the United States steel industry has been one of the most protected sectors of the...

Editor's Pick

If the essence of stock investing is to buy low and sell high, then buying not just low, but at a steep discount, optimizes...

Politics

Volodymyr Zelenskyy’s future as president of Ukraine was cast into doubt by longtime supporter Sen. Lindsey Graham, R-SC, and others after the embattled leader...

Politics

President Donald Trump will make the first address of his second term to a joint session of Congress on Tuesday. His first six weeks...

Generated by Feedzy