The Economics of Land-Use Regulations

There is a clear decrease in land values as we cross into more heavily regulated municipalities. There is also a steep decline in the share of land developed in more regulated municipalities. In short, the own-lot effect of land-use regulations is clearly negative and sufficiently large to warrant concern. We also find that prices drop slightly as we move further into the interior of more regulated municipalities, showing that land-use regulations seem to have a negative external effect. The implications of our research are straightforward. The benefits of a modest reduction in land-use regulations are likely to be greater than the benefits landowners receive from regulating their neighbors.

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