We characterize the distribution of suburban homeowners’ preferences for housing unit density. To measure welfare changes under counterfactual increases in density, we first construct a novel house-level measure of exposure to density and identify its price effects in a boundary discontinuity design. On the borders of municipalities with larger minimum lot sizes, lots are 3,000 ft² larger and houses are $40,000 costlier. We exploit the systematic variation in density exposure induced by these discontinuities to estimate price effects. We then connect these estimates to a structural hedonic model of housing choice to retrieve individuals’ preferences for density. Overall, we find an average welfare loss among incumbent homeowners from a 1/2 unit per acre increase in density (which is equivalent to a 0.3 standard deviation in density) of about $9,500, with significantly larger losses under counterfactual increases solely from rental units. There is other noteworthy heterogeneity in these preferences, too. Most households have only a moderate preference over density. The median welfare loss is only 55% of the average, implying a long, left tail of those with more extreme aversions to density. This tail disproportionately contains households in affluent, low density neighborhoods. In sum, our results document an important foundation of the demand for density regulation across U.S. suburbs that we hope serves as a valuable input into future research into the considerable costs of that policy.
Authors
- Acknowledgements & Disclosure
- We thank Braydon Neiszner and Vivian Wang for helpful research assistance. We also appreciate the comments of Hector Blanco (discussant), Gilles Duranton, Fernando Ferreira, Ed Glaeser, Matthew Turner and seminar participants at the University of Wisconsin, the 2024 UEA North American Conference and the Urban Lunch Seminar at Wharton. Naturally, we remain responsible for the final product. Gyourko thanks the Research Sponsor Program of the Zell/Lurie Real Estate Center for financial support, and McCulloch thanks the Population Studies and Training Center at Brown University, which receives funding from the NIH, for training support (T32 HD007338) and for general support (P2C HD041020). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w33078
- Pages
- 50
- Published in
- United States of America
Table of Contents
- 1 Introduction 3
- A Relation to the Literature 6
- 2 Stylized model of a border with a minimum lot size restriction 8
- 3 Data 11
- A The Wharton Surveys and Administrative Boundaries 11
- B Housing and parcel characteristics 14
- a Elevation and slope 15
- C Constructing a measure of density exposure 15
- D Additional controls 18
- a Distance to local amenities 18
- b School district test scores 19
- c Demographics 19
- E Summary statistics 19
- 4 Discontinuities and density exposure at municipal boundaries 23
- 5 Structural hedonic model of housing choice 25
- A Review of equilibrium in the hedonic model 25
- B Recovering demand parameters 27
- 6 Hedonic regressions 29
- A Recovering preference estimates 30
- 7 Results 31
- A Empirical hedonic price schedule 31
- B Welfare counterfactuals 32
- C Robustness Analysis 33
- D Preference heterogeneity 37
- E Moving to avoid density 42
- F Discussion: Implications for Regulatory Change 44
- G What Mediates the Distaste for Density? A First Look at Neighbor Preferences 45
- 8 Conclusions and Next Steps 47
- References 49
- Appendix A Additional figures and tables 1
- Appendix B Negative product characteristics in the hedonic model 1
- Appendix C Alternative approaches to utility parametrization 1
- A. Model 1
- B. Welfare change comparison 1
- Appendix D Price gradient around a border 1
- A. An equivalence result 1
- B. Supply effects 1
- C. When could supply effects effect the slope of the pricing gradient? 1
