The Geographic Determinants of Housing Supply

The Geographic Determinants of Housing Supply

I process satellite-generated data on terrain elevation and presence of water bodies to precisely estimate the amount of developable land in U.S. metropolitan areas. The data show that residential development is effectively curtailed by the presence of steep-sloped terrain. I also find that most areas in which housing supply is regarded as inelastic are severely land-constrained by their geography. Econometrically, supply elasticities can be well characterized as functions of both physical and regulatory constraints, which in turn are endogenous to prices and demographic growth. Geography is a key factor in the contemporaneous urban development of the United States…Empirically, most areas that are widely regarded as supply-inelastic were found, in fact, to be severely land-constrained by their geography. Deploying a new comprehensive survey on residential land use regulations, I found that highly regulated areas tend to be geographically constrained also. More generally, I found recent housing price and population growth to be predictive of more restrictive residential land regulations. The results point to the endogeneity of land use controls with respect to the housing market equilibrium.

Albert Saiz

The Quarterly Journal of Economics

August 2010

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By |2018-01-01T00:00:00-08:00January 1st, 2018|Efficiency/Growth, Land Use Regulation, Reference|