Increasing Land-Use Regulations Mean Increasing Rents

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May 13, 2016

Cities with the most restrictive land-use regulations have rents that, on average, rise more quickly than cities and communities with less-restrictive land use regulations. And when rapid population growth is added on top of that, rents rise even more quickly.

When the population of a given area is already increasing rapidly, a city is bound to run into some supply and demand issues. But if the population happens to be growing in a city where there are also strict land-use regulations, it can become twice as hard to keep up with demand and construct more units.

Zillow looked at the relationship between population growth, rent appreciation, and the ease or difficulty of building new homes across U.S. counties between 2013 and 2014 in an effort to analyze the effects of population growth and land regulation in relation to rent growth.

What Zillow found is that rent appreciation is 2.5 times stronger in counties with the most residential land-use rules and regulations than in counties with the fewest restrictions. While some counties with strong population growth and the fewest residential land-use restrictions saw rents rise a significant amount, other counties experiencing similar population growth and land-use regulations actually saw rents decrease.

But in counties with the most land-use restrictions, there is a strong relationship between population growth and a rise in rents. Places with strong population growth that are also highly regulated experienced strong rent growth.

For a complete look at the data, including various charts, and the studies methodology, click the link below.

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