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Land-Use Regulations, Property Values, and Rents: Decomposing the Effects of the California Coastal Act

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  • Andrew Plantinga
  • Christopher Severen

Abstract

REVISED MARCH 2018 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 prices and rents for multifamily housing units. The Coastal Act applies to a narrow section of the California coast, allowing us to compare properties on either side of the jurisdictional boundary. The Coastal Act offers several advantages for measuring the effects of land-use regulations, including plausible exogeneity of the boundary location, which we confirm using historical data on boundary placement, and orthogonality of the boundary to other jurisdictional divisions. Extending previous studies, we decompose the effects of the regulation into a local effect, the net price effect of restrictions on the subject property and its immediate neighbors, and an external effect, the value of amenities generated by restrictions on all properties within the regulated area. Data on multifamily housing rents are used to isolate the effect of restrictions on adjacent properties (the neighbor effect). Our analysis of multifamily housing prices reveals local and external effects of approximately +8% and +5%, respectively. The rent analysis indicates a zero neighbor effect, which suggests that the local benefits of the Coastal Act have not yet materialized but are expected to in the future. This interpretation of our results is supported by additional evidence on building ages and assessed building and land values.

Suggested Citation

  • Andrew Plantinga & Christopher Severen, 2017. "Land-Use Regulations, Property Values, and Rents: Decomposing the Effects of the California Coastal Act," Working Papers 17-33, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:17-33
    Note: Revised March 2018
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    Cited by:

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    3. Molloy, Raven & Nathanson, Charles G. & Paciorek, Andrew, 2022. "Housing supply and affordability: Evidence from rents, housing consumption and household location," Journal of Urban Economics, Elsevier, vol. 129(C).
    4. 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).
    5. 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).
    6. 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).
    7. 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.
    8. Kulka. Amrita & Sood, Aradhya & Chiumenti, Nicholas, 2022. "How to Increase Housing A ordability? Understanding Local Deterrents to Building Multifamily Housing," The Warwick Economics Research Paper Series (TWERPS) 1420, University of Warwick, Department of Economics.
    9. Ayşe İmrohoroğlu & Kai Zhao, 2022. "Homelessness," Working papers 2022-17, University of Connecticut, Department of Economics.
    10. 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).
    11. 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.
    12. 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.

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    More about this item

    Keywords

    land use regulations; housing prices; California Coastal Commission;
    All these keywords.

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • 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
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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