Land Use Regulations and Housing Markets in Large Metropolitan Areas

By Xing, Xifang; Hartzell, David J. et al. | Journal of Housing Research, January 1, 2006 | Go to article overview
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Land Use Regulations and Housing Markets in Large Metropolitan Areas


Xing, Xifang, Hartzell, David J., Godschalk, David R., Journal of Housing Research


Abstract

This article examines the impacts of land use regulations on cross-metropolitan variations in housing prices, rents and housing starts. Based on a 2002 national survey of local jurisdictions' land use regulations, two indices of regulatory stringency are created: one measures the use of growth management tools and the other measures the impacts of development process administrative practices. The results show that the growth management tools index is positively associated with housing prices and rents. A positive relationship is also found between the growth management tools index and the number of starts of multiple-unit housing. Similarly, a positive relationship is seen between the development process index and metropolitan housing prices and rents. In addition, more restrictive development processes, as measured by the index, restrain housing starts under conditions of rapid population growth.

(ProQuest: ... denotes formulae omitted.)

Introduction

Land use controls are pervasive across the United States. States, cities and counties manage the use of land in many ways. Development restrictions can have a significant impact on the behavior of real estate developers, owners and renters. Despite the relative pervasiveness of such controls, very few studies have analyzed the impacts of their imposition across a large number of metropolitan areas.

This article provides the results of a survey of planning directors in large metropolitan areas in the U.S. The objective of the survey was to determine land use controls that were in use in metropolitan areas, and how the implementation of these controls impacts development. In addition, the study sought to determine the ways that such controls are explicitly and implicitly applied in different cities and counties in the U.S. Explicit tools are specific regulatory devices that are used to manage the supply and development of land. Implicit constraints result from administrative practices within jurisdictions.

Explicit regulatory tools allow local governments to proactively manage their growth, rather than simply responding to development requests. For example, adequate public facilities ordinances are designed to ensure that infrastructure is in place prior to the approval of a development project that will be drawing on the infrastructure. In some jurisdictions, for example, development entitlements are not given until it is certain that the capacity of roads, utilities, or schools is there to meet increased demand on these facilities. Other examples of explicit controls include impact fees, development permit caps and urban growth boundaries. In each case, the restriction is imposed on developers to define what can be done or where it can be done, and if it imposes externalities, how the cost is passed on to the developer and consumer (Porter, 1997).

Other restrictive activities on the part of local jurisdictions are more implicit, and the result of administrative responses to development requests. For example, developers in every jurisdiction must seek approval for their projects. The process typically involves applying for entitlements to build the project that is desired. In many jurisdictions, the number of months that it takes from application to approval can be quite short. In others, the time period from application to approval of entitlements can be quite long, in effect constraining the amount and timing of development through delays in the review and approval process. While there is no explicit restriction, in practice the delay lengthens the development period and increases the cost to the developer (Luger and Temkin, 2000).

Many jurisdictions receive a large number of development applications but approve very few of them. This is also an administrative form of development restrictiveness. If a large number of applications are turned down, this indicates a stringent land management system. A similar argument can be made regarding the percentage of applications approved requesting expansion of the supply of developable land through rezoning or annexation.

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