Estimating the Economic Value of Zoning Reform
Abstract/Contents
- Abstract
- We develop a framework to estimate the economic value of housing regulations, and apply it to a 2016 zoning reform in the city of Sao Paulo, which altered maximum permitted construction to land area at the city-block level. Using a spatial regression discontinuity design, we find that developers swiftly reacted to the reform by filing for more multi-family construction permits in blocks with higher allowable densities. We incorporate these micro-estimates of developer responses to zoning reforms into an equilibrium model of housing supply and demand to estimate the long term impact of zoning changes on construction, house prices, residential location decisions and resident welfare. Supply responses from the reform produce a 1.4 percent increase in the total housing stock, leading to a 0.4-0.9% reduction in prices. Consumer welfare gains increase 4.5-fold once we account for equilibrium changes in the built environment, since higher neighborhood density and newer buildings are features highly valued by households. There is also substantial heterogeneity, with neighborhoods with the largest increases in permitted density receiving more construction (13.8%) and consequently ending up with lower house prices (4.4%). Moreover, college-educated and higher income households gain the most from the reform, because more of those families can now move from the suburbs to the more central parts of the city. However, nomimal house price losses faced by existing homeowners and landlords overshadow all housing consumption gains, which may explain opposition to higher densification in many cities. Finally, counterfactual simulations of more aggressive zoning reforms - e.g. doubling allowed densities - produce much larger welfare gains.
Description
| Type of resource | text |
|---|---|
| Date created | September 9, 2021 |
Creators/Contributors
| Author | Anagol, Santosh |
|---|---|
| Author | Ferreira, Fernando |
| Author | Rexer, Jonah |
| Organizer of meeting | Diamond, Rebecca |
| Organizer of meeting | van Dijk, Winnie |
| Organizer of meeting | Schneider, Martin |
| Organizer of meeting | Tsivanidis, Nick |
Subjects
| Subject | economics |
|---|---|
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
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- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Anagol , S., Ferreira, F., and Rexer, J. (2022). Estimating the Economic Value of Zoning Reform. Stanford Digital Repository. Available at https://purl.stanford.edu/br595wb8172
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SITE Conference 2021
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