New Study Examines the Cost of Land-Use Regulations

A recent study by economists Ed Glaeser of Harvard University and Joe Gyourko at the Wharton School of the University of Pennsylvania explores how much a house should cost to build if land-use regulations were drastically cut back. Using construction industry data, the authors argue that the standard American home should cost around $200,000, a figure that includes the cost of construction, what land would cost in a lightly regulated market and a modest profit for developers. However, land prices in many markets, particularly in cities, are extremely expensive due in part to local land-use regulations. The authors claim that building a home in the San Francisco area should cost around $281,000, but the actual price is $800,000. According to the authors, most of the difference in cost is caused by regulatory hurdles like design and environmental reviews that can add years to a project’s timeline and suppress the overall housing supply.

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