It is widely believed that land-use regulations, such as zoning laws that restrict real estate
development, raise the marginal cost of housing, thereby reducing market supply. Jackson
(2016) for example shows that increased land-use regulations reduce residential permitting
by 4-8 percent. By reducing supply, land-use restrictions likely put upward pressure on
housing price; all else being equal, Zabel & Dalton (2011) find that increasing the minimum
lot size required per dwelling by one acre raises house prices by about nine percent.
By how much do think a nine percent increase in housing price impacts consumer
welfare? Provide a range based on the price elasticities cited above. Please show all
of your work, including math and diagrams.
Given your estimates, what would consumers be WTP for to avoid a one acre
increase in the minimum lot size?
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