How to Increase Housing Affordability: Understanding Local Deterrents to Building Multifamily Housing
An important way to ensure low rents and low house prices is to increase the housing supply, which in land-constrained metropolitan areas involves constructing denser forms of housing such as smaller single-family homes and multifamily apartment buildings. Land-use regulations are among the local barriers that are crucial in determining the location, amount, and type of new housing construction. Most of the research on the subject examines the effects of individual regulations on the supply and prices of single-family homes; however, this study looks at how different zoning regulations interact with each other to affect the supply of various types of housing and the prices of single-family homes and rents for multifamily apartments. This paper focuses on three regulations and their interactions: multifamily zoning, maximum-height restrictions, and density restrictions that determine the number of housing units that can be built on an acre of land. The authors use a novel, lot-level land-use-regulation zoning atlas that includes the 101 cities and towns of Greater Boston, and it employs an empirical strategy that studies effects at regulation boundaries with discontinuous jumps in the size and type of housing due to different types of zoning regulations.
- Relaxing density restrictions alone and in combination with relaxing maximum-height restrictions and allowing the construction of multifamily homes are the most effective ways of increasing the supply of multifamily buildings and reducing multifamily rents and single-family-home prices.
- These supply effects are more substantial for smaller multifamily buildings (two or three units) than for larger apartments (four or more units).
- Allowing multifamily housing alone without increasing density is less likely to increase the supply of apartments and lower rents.
- The decline in rents and house prices due to relaxed regulations is a direct effect of changing the size and types of housing built in an area and an indirect effect of creating negative externalities by increasing neighborhood density.
- Relaxing zoning regulations leads to more significant increases in the housing supply near the central business district (CBD), where, in theory, land is most in demand. However, the largest decreases in rents and house prices occur in mature suburbs that provide an easy commute to the CBD, face lower in-migration pressures, and where strict regulations lead to higher prices.
- In evaluating Massachusetts’ Chapter 40A law amendment requiring communities to zone for multifamily development and allow density of as many as 15 units per acre near metro transit stops, the authors find that the largest housing cost decreases from the reforms could occur in mature suburbs rather than near the central business district of Boston. They also find that the reforms would have a greater effect on single-family house prices than on multifamily rents.
- The authors also evaluate Massachusetts’s Chapter 40B law, an inclusionary zoning policy designed to overcome aspects of municipal zoning bylaws and community opposition to building more affordable units. They find that Chapter 40B is not a substitute for relaxing land-use regulations, particularly with respect to providing affordable multifamily housing. However, the law does complement relaxed zoning regulations by allowing developers to build more units than they would otherwise.
The finding that relaxing zoning regulations leads to a decline in house prices as well as a decline in rents may be welcome news for renters and first-time homebuyers, but it could give current homeowners further reason to be politically opposed to zoning reforms. The finding lends credence to the belief that stricter zoning laws limit negative externalities and that relaxing these regulations lowers single-family house prices as homeowners generally dislike living in dense neighborhoods. Balancing these effects on current homeowners with the need to lower housing costs is an important consideration for policymakers seeking to address housing affordability by reforming local zoning laws.
This paper studies how local land-use regulations and community opposition affect the trade-offs to building single-family, multifamily, and affordable housing and how their effects on rents differ from their effects on house prices. Using lot-level zoning regulations and a boundary discontinuity design at regulation boundaries in Greater Boston, we obtain causal estimates for the effects of zoning regulations on the supply of different types of housing, single-family-house prices, multifamily rents, and households’ willingness to pay for higher density. We find that relaxing density restrictions (minimum lot size and maximum number of dwelling units)—either alone or in combination with relaxing maximum-height restrictions or allowing multifamily housing—is the most fruitful policy reform for increasing the housing supply and reducing multifamily rents and single-family-house prices. However, adopting multifamily zoning or relaxing height regulations alone has little effect on the number of units built or on rents. Moreover, in each land-use relaxation scenario where rents fall, house prices also fall, complicating the political economy of land-use reform. We also find that mature suburbs that are closer to a city center and have a representative town meeting structure of local governance are the most restrictive with respect to adding multi-unit housing. Furthermore, inclusionary zoning policies such as Massachusetts’s Chapter 40B rarely substitute for relaxing zoning regulations, particularly restrictions on building multifamily housing.