Landownership and Welfare Impacts of Zoning Regulations

Abstract

Most cities practice various forms of land use regulations. These regulations are implicitly assumed to improve the welfare of the residents in these cities. In practice, however, it is often unclear how much each group of residents gains from a specific measure of land use regulation. Since an effective regulation will improve the efficiency of the land market in the city, it will generally increase the land rents in the city. Then, we can conjecture that the welfare effect of a regulation on each specific group of residents will crucially depend on whether they have land in the city. In particular, if the benefits of a regulation are mostly internalized into land rents, then residents without landownership may gain little from the regulation or even become worse off. If so, then city planners must be careful in evaluation of the impact of land use regulations on various groups of city residents.