Land Use Regulation and the Rental Housing Market: A Case Study of Massachusetts Communities

RR07-13: The effect of local land use regulations on housing markets has been the subject of extensive research and discussion among both urban economists and policymakers. However, very few studies distinguish between the effects on owner-occupied and rental housing. Since most low- and moderate-income families are renters, the effects of regulation on the rental market will have important implications for what is traditionally regarded as “affordable” market-rate housing. In this paper, I use a uniquely detailed dataset on local zoning in eastern and central Massachusetts to examine the extent, origins, and effects of regulations on the rental housing market. Results suggest that communities with less restrictive zoning issue significantly more building permits for both multifamily and single-family units and have lower prices of owner-occupied housing, but do not have significantly lower rents. However, the effect of regulations on rents may be confounded by the development of subsidized rental housing under the state’s affordable housing law…