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The long-run effects of minimum lot size zoning on housing redevelopment

Housing Economics. September 20, 2021

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Housing developers in growing cities increase housing supply by either building new units on vacant land or demolishing existing units and replacing them with higher-density housing. However, land-use restrictions such as minimum lot size zoning may distort the pattern of redevelopment and life cycle of housing. Previous research has examined the effects of zoning regulations on housing supply and vacant land development decisions, but the implications of minimum lot size zoning for housing redevelopment have not been examined. This paper builds a discrete-time dynamic programming model to examine whether minimum lot size zoning distorts the long-run pattern of housing redevelopment. The model accounts for other previously unexplored features of redevelopment, such as endogenous maintenance decisions. Numerical simulation results show that minimum lot size zoning delays the conversion of vacant land and slows demolition. Additionally, this type of zoning stabilizes housing redevelopment because developers have a greater incentive to maintain buildings under zoning.