On the origins of land use regulations: The ‘influential landowner’ hypothesis
We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints are interpreted as shadow taxes that increase the land rent of already developed plots and increase the cost of developing new housing units. At equilibrium, locations with nicer amenities (or lower development costs) are more developed and, as a consequence, more regulated. We test our model predictions by geographically matching amenity, land use, and historical Census data to metropolitan area level survey data on regulatory restrictiveness. Following the predictions of the model, we use access to the coast as an instrumental variable and we control for a number of alternative explanations in order to demonstrate that metropolitan areas with better access are more developed and more tightly regulated. Consistent with theory, more regulated metropolitan areas also grow more slowly.