THE EFFECT OF LAND USE AND ENVIRONMENTAL REGULATIONS ON HOUSING COSTS

This paper examines the effects of various land use and environmental regulations on land and housing markets. Seven widely used techniques for controlling residential development appear to generate four “direct” and two “indirect” inflationary impacts. Land use and environmental controls directly affect the supply and cost of residential land, shift the cost of public services forward to developers, and increase delay and compliance costs associated with project evaluation. Development controls may also inadvertently facilitate monopolistic behavior in the development industry and predispose developers to orient their projects to high income groups onto which they can more easily pass along higher costs. The paper concludes by offering several policies for reducing the inflationary effects of environmental regulations.