Land Use Regulations and the Value of Land and Housing: An Intra-Metropolitan Analysis

with Paavo Monkkonen and John Quigley, Journal of Urban Economics

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Inferences about the determinants of land prices in urban areas are typically based on housing transactions which combine payments for land and long-lived improvements. In contrast, we investigate directly the determinants of urban land prices, and we analyze the link between the physical access of sites, the topographical and demographic characteristics of their local environment, and the prices of vacant land on those sites. Most importantly, our analysis documents the powerful link between variation in the regulatory environment within a metropolitan area and the prices commanded by raw land as an input to development. We then relate the variation in land prices to the prices paid by consumers for housing in the region, documenting that local land use regulations have quite large effects on the value of houses sold in the region. This is in part because regulations are so pervasive, and also because land values represent such a large fraction of house values in the San Francisco Bay Area. Land Prices and Regulation View more presentations from nilskok.