A Global Perspective on Land Use Regulations and Housing Outcomes

Abstract

This paper examines the relationship between land use regulations and housing outcomes, especially housing affordability and informality. Using a unique and important database of 191 metropolitan areas from every region of the world, it assesses whether there are consistent emergent patterns from a global perspective that may in turn be useful for informing policy on land use regulations in specific locales and contexts. The empirical results point to a number of striking conclusions. Empirical evidence from across the globe underlines the dynamic nature of the interaction between land use regulations and informality. In the long run, the evidence strongly suggests that more restrictive land use regulations lead to more rapid growth in informal settlements. This result conforms with prior literature that emphasizes the exclusionary effects of land use regulations. As more restrictive regulations are applied, households find themselves with fewer options outside the informal sector. This phenomenon is accentuated during periods of rapid urbanization. But from a static perspective, the situation looks quite different over the short run, since cities with more stringent land use regulations tend to have fewer informal settlements, and this finding is strengthened further when those land use regulations are coupled with active enforcement.