Zoning and the Dynamics of Urban Redevelopment
Submission statement: a top economics working paper (Best student paper at the 2025 European UEA meeting) adds some nuance to our discussion of zoning changes. From the abstract: "While zoning strongly constrains city growth, the effects of relaxing regulation take decades to materialize and are limited in inexpensive or densely built areas. This is due to the large fixed costs of redevelopment, which rise sharply with the size of existing buildings."
Some key findings:
In the data: "96% of demolished buildings are replaced with larger ones, with new structures on average 3.4 times larger than the ones they replace"
In the data: "While upzoning does increase construction, its effects materialize slowly over time: ten years after the policy change, only 9% of the newly allowed floorspace has been built"
Model prediction: "an ambitious but realistic upzoning of NYC could increase the city’s floorspace supply by 15 pp over 40 years. However, the take-up of upzoning remains limited in the medium run: at a 40-year horizon, only 18% of the newly allowed floorspace is built"
Model prediction: "Fully removing zoning regulations yields larger increases in floorspace (+58 pp), but even in this extreme scenario, residential rents in NYC decrease only moderately (-17 pp)...removing zoning would still yield sizable welfare gains for New Yorkers (+13 pp by 2060), with lower-income workers benefiting the most"