How to Increase Housing Affordability: Understanding Local Deterrents to Building Multifamily Housing

Abstract

This paper studies how various land-use regulations interact to affect housing supply and affordability. We use cross-sectional variation across space from a novel parcel-level zoning data and a boundary discontinuity design at regulation boundaries to obtain causal estimates for the effect of various zoning regulations on the supply of different types of housing, single-family house prices, multifamily rents, and households' willingness-to-pay for higher density. We find that relaxing density restrictions (minimum lot size and maximum dwelling units), either alone or jointly with relaxing other regulations, is most effective at increasing supply, particularly of multifamily properties, and reducing rents and house prices. Conversely, enabling multifamily zoning or relaxing height regulations alone has little impact. Our results suggest that the small-scale reforms in zoning regulations proposed around the country can increase housing affordability. However, a fall in multifamily rents is often accompanied by a reduction in single-family house prices, complicating the political economy of land-use reform.

Zoning Change: Upzonings, Downzonings, and Their Impacts on Residential Construction, Housing Costs, and Neighborhood Demographics

“…That said, several recent static zoning comparisons use causal methods, such as boundary discontinuity designs (Kulka, Sood and Chiumenti 2022) and effect decomposition (Severen and Plantinga 2018). These may produce high-quality estimates, but I do not examine them further as I focus on zoning change .…”

“…Some reforms may have reaffirmed what was already occurring, transforming development processes from requiring flexibility measures to being allowed by-right. Another possibility is that upzonings only tackled one of the many interconnected elements of land-use policy, such as allowing height increases but not reductions in minimum lot sizes, thus preventing density increases (Kulka, Sood and Chiumenti 2022). Or it is possible that upzonings allowed increased density—but not enough to justify increased costs associated with larger buildings on infill sites, since construction costs do not increase linearly with height and infill construction is more challenging than greenfield building (Eriksen and Orlando 2022; Orlando and Redfearn 2022).…”