The United States is facing a housing affordability crisis that is exacerbating economic and racial inequities. These challenges disproportionately affect households with low incomes and people of color. One explanation for the affordability crisis is that supply has not matched demand. The debate over how to increase the supply of affordable housing, however, stands unresolved. Many housing economists posit that inadequate supply stems from overly restrictive land-use regulations. But others argue that loosening land-use restrictions may not increase housing supply or decrease housing prices. As such, additional research is necessary to identify the effects that land-use reforms have on housing supply and price.
To examine these issues, we generate the first cross-city panel dataset of land-use reforms that increase or decrease allowed housing density and estimate their association with changes in housing supply and rents. To generate reform data, we use machine-learning algorithms to search US newspaper articles between 2000 and 2019, then manually code them to increase accuracy. We identify 180 reforms increasing allowed density (upzoning) or reducing it (downzoning) across 1,136 cities in eight metropolitan regions. We merge these data with US Postal Service information on per-city counts of addresses and Census data on demographics, rents, and units affordable to households of different incomes. We then estimate a fixed-effects model with city-specific time trends to examine the relationships between land-use reforms and the supply and price of rental housing.
We find that reforms that loosen restrictions are associated with a statistically significant 0.8 percent increase in housing supply within three to nine years of reform passage, accounting for new and existing stock. This increase occurs predominantly for units at the higher end of the rent price distribution; we find no statistically significant evidence that additional lower-cost units became available or became less expensive in the years following reforms. However, impacts are positive across the affordability spectrum and we cannot rule out that impacts are equivalent across different income segments. Conversely, reforms that increase land-use restrictions and lower allowed densities are associated with increased median rents and a reduction in units affordable to middle-income renters.
These results suggest that reforms loosening restrictions are, on average, associated with an uptick in new housing supply. But this increase is likely inadequate in the short term to expand the availability of housing that is affordable to low- and middle-income households, at least within the jurisdictions that execute reforms and among the reforms that we studied. Reforms tightening regulations potentially worsen conditions for low- and moderate-income renters. Cities should consider pairing direct investments in housing subsidies—such as immediate investments in housing vouchers and project-based subsidies for publicly assisted housing—with reforms loosening restrictions to address both short-term and long-term housing affordability.
This work was supported by a grant from the Smith Richardson Foundation.