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Constraints on Housing Supply: Natural and Regulatory

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  • Wendell Cox

Abstract

Two empirical papers study US housing markets and treat the impacts of both natural geographic constraints, such as water bodies and steep slopes, and regulatory restrictions. Albert Saiz (2010) concentrates on identifying the impact of natural geographic constraints. Saiz creates measures of developable land using an invariant 50-kilometer radius about an urban focal point. I criticize Saiz’s geographical constraint on the basis that its invariant radius renders comparisons between urban areas of differing sizes of questionable value. Moreover, the inter-relation between the two kinds of constraints—the natural and the regulatory—is highly particular to the locale; for example, the effect of a natural geographical constraint would be neutralized by an interior regulatory constraint such as an urban growth boundary. Haifang Huang and Yao Tang (2010) concentrate on the impact of regulatory constraints on booms and busts in local housing markets, but they also make use of the natural-constraint data furnished by Saiz. Both studies also use the Wharton Land Use Regulatory Index, about which I raise a number of questions. I believe that the procedures employed by the two papers have the tendency to understate, at the aggregate level, the pernicious impact of regulatory restrictions.

Suggested Citation

  • Wendell Cox, 2011. "Constraints on Housing Supply: Natural and Regulatory," Econ Journal Watch, Econ Journal Watch, vol. 8(1), pages 13-27, January.
    • Handle: RePEc:ejw:journl:v:8:y:2011:i:1:p:13-27
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    References listed on IDEAS

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    1. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1253-1296.
    2. Wu, Jing & Gyourko, Joseph & Deng, Yongheng, 2012. "Evaluating conditions in major Chinese housing markets," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 531-543.
    3. Huang, Haifang & Tang, Yao, 2012. "Residential land use regulation and the US housing price cycle between 2000 and 2009," Journal of Urban Economics, Elsevier, vol. 71(1), pages 93-99.
    4. Haifang Huang & Yao Tang, 2011. "Dropping the Geographic-Constraints Variable Makes Only a Minor Difference: Reply to Cox," Econ Journal Watch, Econ Journal Watch, vol. 8(1), pages 28-32, January.
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    Citations

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    Cited by:

    1. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2017. "Housing booms and busts and local fiscal policy," ZEW Discussion Papers 17-001, ZEW - Leibniz Centre for European Economic Research.
    2. Peter Gordon & John Cho, 2018. "Agglomeration near and far, the case of Southern California: supply chains for goods and ideas," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(3), pages 517-552, November.
    3. Keith Ihlanfeldt & Tom Mayock, 2014. "Housing Bubbles and Busts: The Role of Supply Elasticity," Land Economics, University of Wisconsin Press, vol. 90(1), pages 79-99.
    4. Liu, Yishen, 2018. "Estimating the elasticity of supply of housing space rather than units," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 1-10.
    5. Jackson, Kristoffer (Kip), 2018. "Regulation, land constraints, and California’s boom and bust," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 130-147.
    6. Haifang Huang & Yao Tang, 2011. "Dropping the Geographic-Constraints Variable Makes Only a Minor Difference: Reply to Cox," Econ Journal Watch, Econ Journal Watch, vol. 8(1), pages 28-32, January.
    7. Anundsen, André Kallåk & Heebøll, Christian, 2013. "Supply Restrictions, Subprime Lending and Regional US Housing Prices," Memorandum 04/2013, Oslo University, Department of Economics.

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    More about this item

    Keywords

    Land use regulation; Wharton Land Use Regulatory Index; urban growth boundary; Portland; smart growth; housing bubble; housing affordability;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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