Bombs, boundaries and buildings : A regression-discontinuity approach to measure costs of housing supply restrictions

Many cities apply planning policies to protect a valuable building stock. These policies may have adverse side-effects. We aim to estimate the costs of within-city regulatory restrictions for house owners. To avoid endogeneity issues with respect to supply restrictions, we employ a regression-discontinuity approach using a World War II bombing boundary within the city of Rotterdam. Conditional on amenities and housing attributes, in the bombed area (where fewer restrictions apply) house prices are about 10% higher. This implies regulatory costs of about 0.72 million Euro per hectare for the area under consideration. The results suggest that house owners' benefits should be substantial to compensate for the costs of additional restrictions.

► In this paper we measure costs of regulatory constraints for house owners. ► We employ a regression-discontinuity approach using a WWII bombing boundary. ► The estimated costs of restrictions are about 10%. ► This implies a difference in regulatory costs of about 0.72 million Euro per hectare.