Do land use regulations slow down the economy?

Yes, certainly in the richest and largest cities, possibly not elsewhere.

One study argued that the presence of housing restrictions in rich American cities from 1964 to 2009 have made it far harder for people to find good jobs, to such an extent that American GDP in 2009 was 36% smaller than it could have been, but its model was rather optimistic.

Other studies with more cautious premises for economic modeling and policy counterfactuals have suggested that reducing housing restrictions could have grown American GDP by 1%, 0.7-2%, 8%, or 10%, with evidence that some of the increased output would be offset by higher costs of living. A 2% larger American economy is still considered quite a substantial impact; it would be equivalent to an extra $440 billion, or $3,400 per household, per year.

Despite disagreement on the magnitude of impact, there is agreement that land use regulations do slow the economy somewhat. Economic freedom is known to generally promote growth, so zoning laws may be expected to slow the economy. There are also credible theories that housing restrictions make it harder for the federal government to promote economic growth and contributed to the Great Recession. But perhaps the most robust evidence is the comparison of different parts of London based on bombings during World War II: the economy grew as the government was more likely to approve the construction of tall buildings in areas which were recently destroyed by bombs.

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