The research shows that rents increase when the demand for rental housing is more than what the market is currently offering. Restrictive zoning policies make it more difficult and more expensive to build new housing to meet the demand. Restrictive zoning also limits the amount of land that can be used for residential development, further constraining supply. Most researchers have found that this drives up home prices and rents. Rents usually rise quickly when an area has rapid job growth,an influx of new residents, or a surge in households.
In the four cities studied, evidence showed that adding more housing of any kind helps slow rent growth.
Research released by the United States Department of Housing and Urban Development (HUD) this past April had very similar findings.
The research showed that “local land use regulations and zoning rules contribute to the national housing supply crisis by artificially limiting housing construction and increasing costs.”
The report concluded “that restrictive land use and zoning laws are major drivers of the national housing shortage. These policies can drive up housing prices, limit economic growth, exacerbate climate change, and maintain residential segregation.”
The research has found a strong relationship between restrictive land use and zoning regulations and higher housing prices.
This is especially true in areas with higher demand like Northwest Arkansas— where local land use regulations can reduce “housing supply elasticity,” which leads to fewer units on the market.
The research also shows how restrictive zoning limits a worker’s ability to move to regions experiencing job growth, which has stunted national economic productivity and growth.
As the region tackles the issue of housing affordability, the first point of order should be to analyze what current policies are limiting the ability to increase housing supply. With zoning reform that allows for more uses, we may pave the way for more housing optionality.