New Index Shows Regulation High in New England, Pacific States

A recent study is the first to construct an annual measure of housing supply regulations for the contiguous United States. The new housing supply regulation index constructed by Peter Ganong and Daniel Shoag examines the scaled count of state appeals court decisions that mention “land use.” States with a higher share of court decisions mentioning “land use” are thought to have more restrictive housing supply regulations. The higher the index, the greater the share of court decisions mentioning “land use.”

In 2010, the state with the highest index was Maine at 3.388 followed by New Hampshire at 2.407. The state with the lowest index was Alabama at 0.077 followed by Louisiana at 0.101. The median index for the 48 states measured was 0.4275.

The map below splits states into quartiles based on the newly constructed index for 2010.

Quartile_Map

States in the lowest quartile, thought to have the least restrictive housing supply regulations, are concentrated in the south. States in the highest quartile, thought to have the most restrictive housing supply regulations, are New England and Pacific states.

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Although not an annual series, the Wharton Residential Land Use Regulatory Index (WRLURI) provides a valid comparison for the newly created index. The WLURI index was created from a 2005 survey of 2,600 communities across the U.S. The survey asked local officials a series of questions about the land use regulatory process, rules of local residential land use regulation, and outcomes of the regulatory process. Consistent with the findings of Ganong and Shoag, the WRLURI index shows New England and Pacific states to be highly regulated when compared to other regions.

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The new index provides a tool in future research on housing supply regulation. Using the index the authors have already shown changes in housing supply regulation to be strongly predictive of housing prices. These results are consistent with research conducted by NAHB, which finds a quarter of home prices are attributable to various regulatory costs.



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