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Land-use regulations, property values, and rents: Decomposing the effects of the California Coastal Act

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  • Severen, Christopher
  • Plantinga, Andrew J.

Abstract

Land-use regulations can lower real estate prices by imposing costs on property owners, but may raise prices by restricting supply and generating amenities. We study the effects of the California Coastal Act, one of the nation’s most stringent land-use regulations, on the price and rental income of multifamily housing. The Coastal Act applies to a narrow section of the California coast, allowing us to compare properties just on either side of the jurisdictional boundary. The setting is advantageous for the study of land-use regulation: boundary location is plausibly exogenous, which we confirm with historical data on boundary placement, and orthogonal to other jurisdictional divisions. We decompose the effects of the regulation into (i) a neighbor effect, the value of restrictions on adjacent properties, (ii) a local effect, which reflects the net effect of own-lot restrictions and the neighbor effect, and (iii) an external effect, the value of amenities generated by restrictions on all properties within the regulated area. Our analysis of multifamily housing prices reveals local and external effects of approximately +6% and +13%, respectively. We use data on rental income to estimate a zero neighbor effect. Together with evidence on building ages and assessed building and land values, this suggests that property owners anticipate that the Coastal Act will provide protection from undesirable development on adjacent properties, even though material differences have not yet appeared.

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  • Severen, Christopher & Plantinga, Andrew J., 2018. "Land-use regulations, property values, and rents: Decomposing the effects of the California Coastal Act," Journal of Urban Economics, Elsevier, vol. 107(C), pages 65-78.
    • Handle: RePEc:eee:juecon:v:107:y:2018:i:c:p:65-78
    DOI: 10.1016/j.jue.2018.07.001
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    Cited by:

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    2. Nakajima, Kentaro & Takano, Keisuke, 2023. "Estimating the effect of land use regulation on land price: At the kink point of building height limits in Fukuoka," Regional Science and Urban Economics, Elsevier, vol. 103(C).
    3. Bieri, David S. & Kuminoff, Nicolai V. & Pope, Jaren C., 2023. "National expenditures on local amenities," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    4. Koster, Hans R.A. & van Ommeren, Jos & Volkhausen, Nicolas, 2021. "Short-term rentals and the housing market: Quasi-experimental evidence from Airbnb in Los Angeles," Journal of Urban Economics, Elsevier, vol. 124(C).
    5. Guillaume Chapelle & J.B. Eyméoud & C. Wolf, 2023. "Land-use regulation and housing supply elasticity: evidence from France," THEMA Working Papers 2023-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    6. Ayşe İmrohoroğlu & Kai Zhao, 2022. "Homelessness," Working papers 2022-17, University of Connecticut, Department of Economics.
    7. Kulka. Amrita & Sood, Aradhya & Chiumenti, Nicholas, 2022. "How to Increase Housing A ordability? Understanding Local Deterrents to Building Multifamily Housing," CAGE Online Working Paper Series 635, Competitive Advantage in the Global Economy (CAGE).
    8. Xiaoyu Long & Luyao Wang & Weipeng Li, 2023. "Geographical Influences on Job–Housing Balance: A Study of Coastal Urban Areas in Boston," Sustainability, MDPI, vol. 15(22), pages 1-21, November.
    9. Nicholas Chiumenti & Amrita Kulka & Aradhya Sood, 2022. "How to Increase Housing Affordability: Understanding Local Deterrents to Building Multifamily Housing," Working Papers 22-10, Federal Reserve Bank of Boston.
    10. Francesco Angelini & Massimiliano Castellani & Pierpaolo Pattitoni, 2023. "You can’t export that! Export ban for modern and contemporary Italian art," European Journal of Law and Economics, Springer, vol. 56(3), pages 533-557, December.
    11. Parkhomenko, Andrii, 2023. "Local causes and aggregate implications of land use regulation," Journal of Urban Economics, Elsevier, vol. 138(C).
    12. Pasquini, Ricardo A., 2021. "Effects of regulating the brokerage commission in the rental market: Evidence from Buenos Aires," Journal of Housing Economics, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    Land use regulation; Housing prices; Spillovers; California Coastal Commission; Quasi-experiment; Spatial difference-in-differences; Spatial regression discontinuity;
    All these keywords.

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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