THE EFFECTS OF LAND-USE CONSTRAINTS ON HOUSING PRICES

Estimates the direct and spillover effects of zoning controls along with other growth restrictions on housing prices. We consider the effects on housing prices, and hence the effects on developed land, and we show that specific growth controls must be examined in the overall context of local land-use policy, and that interjurisdictional as well as intrajurisdictional effects must be considered. The study's empirical results indicate that measures of land-use constraints collectively have larger effects than individually. While there have been many studies of the impact of land-use controls on housing prices within an area, unlike others, we explicitly test for spillover effects. To focus on small areas within a county, we employ a pooled cross-section time series data set, constructed from the files of the Montgomery County (Maryland) Planning Board. To control for quality changes we use a double-sale housing price index for this period. The theoretical literature on land-use controls demonstrates that in an open city, land-use controls have no impact on the price of a standard unit of housing. In a closed-city model, coalitions of homeowners within and across communities can raise housing prices through artificially restricting supply levels. -from Authors