In a new paper, Vanessa Brown Calder uses regression analysis to examine the link between housing prices and zoning and land-use controls.
Washington, D.C – In a new analysis released today, Cato policy analyst Vanessa Brown Calder finds that the increase in zoning and land-use regulations over the past decades is reducing the supply of housing, including multifamily and low-income housing. This often overlooked factor further compounds the housing affordability challenges that many U.S. cities currently face. Calder argues that to combat rising home prices, state and local governments must overhaul their development rules rather than continuing to rely on federal housing aid.
Calder uses a unique data set of state-by-state court decisions on land-use and zoning, capturing the growth in regulation over time. She finds Arizona is the 41st least restrictive state in terms of land-use regulation and the 45th least restrictive state in terms of zoning regulation.
Overall, southern states make up some of the least-restrictively regulated states, occupying 8 of the 10 least-restrictive spots for land-use regulation and 7 of the 10 least-restrictive spots for zoning. Unsurprisingly, northeastern states occupy 7 out of the 10 most-restrictive spots for land-use regulation and 6 out of the 10 most-restrictive spots for zoning.
The statistical analysis indicates that rising land-use regulation is associated with rising real average home prices in 44 states, while rising zoning regulation is associated with rising real average home prices in 36 states. The states that have most increased the amount of development rules on land-use have higher housing prices.
Most noteworthy, Calder’s results show that relatively more federal housing aid is given to states with the highest levels of land-use and zoning regulations, likely due to their increased housing costs. The billions of dollars of federal aid used to subsidize renting and buying homes each year thus creates a disincentive for the states to solve their own housing affordability issues. For example, the most-restrictively zoned states receive nearly two times more federal dollars per capita compared to the least-restrictively zoned states.
“Current federal programs provide incentives for state and local government to ignore local contributions to the housing affordability cri-sis,” writes Calder. “Federal money cannot adequately compen-sate for the effect of local zoning and land-use regulations on housing affordability. Even if it could, using federal funds to back damaging local policy is irresponsible.”
To rein in high housing costs, Calder argues states and local municipalities can reform land-use and zoning regulations by reducing the scope of the State Zoning Enabling Act, amending laws to better protect property owners from regulatory takings, and reallocating state funds to cities reducing regulation.