Can ‘Planning’ Deregulate Land Use?

As a matter of economic rationality, local governments should deregulate their housing markets to allow increased supply to meet the rising demand. As a political matter, however, incumbent home owners vociferously and effectively protest against the reduction of zoning restrictions. The temptation, therefore, is to enter into protracted negotiations where city leaders cajole developers into providing subsidized housing on lots far from angry neighbors. In two important respects, this bargaining process defeats the very goal of land-use deregulation necessary for a lasting solution to the housing affordability crisis. First, individualized bargains increase the chance that NIMBY neighbors will hijack local land to exclude housing. Second, individualized bargaining raises the costs of knowing what development rights one buys with the purchase of a lot. Those costs drive away real estate investors, depriving the city of capital sorely needed to remedy a desperate housing shortage.

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