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Evaluating the Long-Run Effects of Zoning Reform on Urban Development

Author

Listed:
  • Ryan Greenaway-McGrevy

Abstract

This paper presents a framework for assessing the long-run effects of zoning reform on urban development, housing construction, and dwelling prices. We begin by developing a version of the monocentric model of the city that features regulatory restrictions on the capital intensity of housing that vary across different residential zones. A key implication of the model is that differences in land price gradients between zones reflect differences in the optimal floorspace that developers build to. This facilitates empirical estimation of the anticipated supply response to zoning reform through the measurement of changes in land price differentials soon after policy announcement. We use the framework to evaluate a recently-implemented upzoning policy in Auckland, New Zealand, finding that changes in land price gradients in upzoned areas compared to non-upzoned areas is consistent with an approximate 18% increase in aggregate floorspace. Using plausible estimates of the house price elasticity of demand from the extant literature, this supply increase equates to a reduction in dwelling prices ranging between 23% and 39%, relative to the counterfactual of no upzoning.

Suggested Citation

  • Ryan Greenaway-McGrevy, 2023. "Evaluating the Long-Run Effects of Zoning Reform on Urban Development," Working Papers 013, University of Auckland, Economic Policy Center (EPC).
    • Handle: RePEc:cyc:wpaper:013
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    Cited by:

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    2. von Bergmann, Jens & Davidoff, Thomas & Lauster, Nathan & Somerville, Tsur, 2025. "Upzoning and redevelopment: The details matter," Journal of Housing Economics, Elsevier, vol. 69(C).
    3. Donovan, Stuart & Maltman, Matthew, 2025. "Dispelling myths: Reviewing the evidence on zoning reforms in Auckland," Land Use Policy, Elsevier, vol. 151(C).
    4. Buchholz, Maximilian & Kemeny, Tom & Randolph, Gregory & Storper, Michael, 2026. "Inequality, not regulation, drives America's housing affordability crisis," SocArXiv 95trz_v1, Center for Open Science.

    More about this item

    Keywords

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    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • 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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