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

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

635/2022 Amrita Kulka, Aradhya Sood & Nicholas Chiumenti
working papers,culture, behaviour and development

635/2022 Amrita Kulka, Aradhya Sood & Nicholas Chiumenti

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.