According to Zillow Research, home values and job growth have both risen since 2010, but home values grew much more steeply in metros with stricter land use regulations. Zillow cites the Wharton Residential Land Use Regulation Index, noting that metro areas in the US can be categorized into three groups of having restrictions on land use: most restrictive, moderately restrictive, and least restrictive. The most restrictive metro areas tend to be in large coastal markets such as New York, Los Angeles, Boston, and San Francisco. Moderately restrictive metros include Chicago, Dallas, and Houston. The least restrictive metros include Indianapolis, St. Louis, and Kansas City.
There have been some legislative efforts to ease land use regulations in the past year. The California State Senate recently voted down SB 827, a bill that would have drastically eased building regulations near frequent transit stops. California is home to several of the largest metros in the heavily regulated category, including Los Angeles and San Francisco, which also rank among the country’s least affordable housing markets.
To begin to address its housing shortage, California successfully passed legislation taking effect in 2017 to ease the rules governing construction of accessory dwelling units. At the municipal level, some cities with housing shortages are trying to make it easy to build more: Seattle is working to upzone (raise the permitted density in) some neighborhoods, allowing developers to build more units in exchange for including affordable units or paying into an affordable housing fund. This analysis of regulations and home values indicates that such easing could alleviate some of the financial pressure on home buyers.
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