Housing supply regulation raises the cost of building new housing. The
consequences of housing supply regulation have been documented in a number of recent
studies including Fischel 2000, Mayer and Somerville 2000, Quigley and Raphael 2004,
Glaeser, Gyourko and Saks 2005, Schill 2005). By limiting supply in some of the most
desirable cities in the United States, such regulation may contribute to the extraordinary
price appreciation that has been observed in major coastal cities such as San Francisco,
Los Angeles, Boston and New York City (Gyourko, Mayer and Sinai 2006).
Why do housing supply regulations differ across space? One explanation focuses
on the median voter’s narrow self interest. Home owners have a financial incentive to
discourage new construction because it reduces the scarcity value of their asset (Fischel
1999). Richer communities may engage in fiscal zoning to keep the poor out. Minimum
lot zoning reduces the likelihood that new entrants will be much poorer than incumbents.
Communities may also enact housing supply regulation to preserve and enhance
local quality of life. Environmentalist communities are especially likely to pursue such
goals. Environmentalists may seek to block local growth to preserve local public goods
such as open space, bike paths and clean air and to preserve the character and culture of
their community.