The Effects of Land-Use Constraints on Housing Prices

A study estimates the direct and spillover effects of zoning controls, along with other growth restrictions on housing prices. Theory leads to the expectation of a positive effect of land-use restrictions on the price of developed land and a negative effect on the price of undeveloped land. To focus on small areas within a county, a pooled cross-section times series data set is employed, constructed from the files of the Montgomery County (Maryland) Planning Board. These data follow 17 planning area groups within the county for the 6-year period 1982-1987. The study focuses on the owner-occupied single-family housing market. Results indicate that land-use regulations raise housing and developed land prices within a locality and demonstrate that spillover effects exist across localities. They also indicate that the effects of zoning and growth management controls taken together exceed their impact when separately measured. Even if there was no spillover impact on land prices, restrictions could cause development to be inefficiently dispersed.