Developers and builders often argue than stringent land use regulation raises housing prices for consumers. Zillow using its own numbers on rents and inventory and data from the Wharton Residential Land Use Regulation Index and the U.S. Census, backs up these long-held attitudes.
Zillow's Sarah Mikhitarian highlights three main conclusions:
- Over the past five years, rents in cities with the most-restrictive land use regulations grew almost three times as quickly as in cities with the least-restrictive regulations.
- Controlling for changes in demand, more-regulated cities experienced a larger drop in inventory than less-regulated cities.
- Tightly regulated cities with higher rents and lower inventory have more adults living with roommates.
The problem is one of simple supply and demand.
Stricter zoning ordinances and building codes in more tightly regulated cities make it more difficult to construct new units, often leading to fewer apartments available to lease and faster growth in rents.
For example, over the past five years the typical rent in the highly regulated city of San Francisco increased 42.4%. In more laissez-faire Chicago, median rent increased just 7% over the same period. On average, rents in the nation’s least restrictive cities rose 6.1% over the past five years, while rents in the most restrictive cities rose 16.7%. And while land use regulations are not the whole story, they certainly contribute.