The impact of minimum lot size regulations on house prices in Eastern Massachusetts

There has been an increased focus on zoning as a cause of high house prices in many metropolitan areas in the United States. But isolating the direct causal impact of zoning on house prices is difficult. This study overcomes the problems in the existing literature by investigating the effect of minimum lot size restrictions (MLRs) on house prices using data on transactions of single-family homes in the greater Boston area from 1987 to 2006. We estimate a model of house prices that include changes in minimum lot size at the zoning district level, variables that account for possible spillover effects in the same town and in nearby towns, and zoning district fixed effects. We estimate price effects due to MLR of 20% or more at the upper end of the impact distribution. We find evidence of significant spillover effects within towns that are similar to those in the zoning district in which the MLR changed. The impact on house prices in nearby towns is significant and as high as 5%. Finally, we find that the impact increases over time with effects as large as 40% occurring 10 years after the change in MLR.

► We estimate the effect of minimum lot size restrictions (MLRs) on house prices in the greater Boston area from 1987 to 2006. ► We estimate price effects due to MLR of 20% or more at the upper end of the impact distribution. ► We find evidence of significant spillover effects in the same town and in nearby towns. ► We find that the impact increases over time with effects as large as 40% occurring 10 years after the change in MLR.