The effect of land use regulation on housing and land prices

This paper investigates the effects of land use regulation restrictiveness on house and vacant land prices. In contrast to prior studies, the index of restrictiveness is treated as an endogenous variable and estimated effects are allowed to vary by market setting. Using data on more than 100 Florida cities, a U-shaped relationship is found between the house and land price effects of greater regulation restrictiveness and the number of cities within the local housing market. Evidence is also provided showing that more restrictiveness increases the size of newly constructed homes.