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Housing productivity and the social cost of land-use restrictions

David Albouy and Gabriel Ehrlich

Journal of Urban Economics, 2018, vol. 107, issue C, 101-120

Abstract: We use metro-level variation in land and structural input prices to test and estimate a housing cost function with differences in local housing productivity. Both OLS and IV estimates imply that stringent regulatory and geographic restrictions substantially increase housing prices relative to land and construction input costs. The typical cost share of land is one-third, and substitution between inputs is inelastic. A disaggregated analysis of regulations finds state-level restrictions are costlier than local ones and provides a Regulatory Cost Index (RCI). Housing productivity falls with city population. Typical land-use restrictions impose costs that appear to exceed quality-of-life benefits, reducing welfare on net.

Keywords: Housing prices; Productivity; Cost function estimation; Regulation; Economies of scale; Urbanization; Quality of life (search for similar items in EconPapers)
JEL-codes: D24 R1 R31 R52 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Housing Productivity and the Social Cost of Land-Use Restrictions (2012) Downloads
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