Regulation, land constraints, and California's boom and bust

Using new data from a survey of top local land-use officials, this paper provides a measure of both local regulatory stringency and the degree to which land constraints inhibit local development in California. After briefly exploring differences in patterns of regulation and land constraints across the state, the index is applied to a model of housing prices. While regulation did not play a meaningful role in the recent housing market boom and bust in California, this paper finds that where housing demand increased through the expansion of subprime lending, land constraints exacerbated the run-up and subsequent crash of local housing prices.