G.L.C. at Amateur Economist wrote an informative article on zoning, an issue which always gets attention at Market Urbanism – Why Zoning Laws Are No Longer a Benefit to U.S. Home Buyers
Virtually every town in the United States has zoning laws which affect land use, lot size, building heights, density, setbacks, and other aspects of property use. Zoning laws are government regulated restrictions on how a particular piece of land can be used – residential, commercial, industrial, agricultural, and recreational. They impose many use restrictions, such as the height and overall size of buildings, their proximity to one another, what percentage of the area of a building lot may contain structures, and what particular kinds of facilities must be included with certain kinds of uses.
G.L.C. goes on to discuss how zoning restrictions, such as height and density restrictions, constrain the supply of housing nationwide. These supply restrictions causes prices to be higher than they would be without restriction. The article also cites data from research by Ed Glaeser and Joe Gyourko:
Edward Glaeser of Harvard and Joe Gyourko of the University of Pennsylvania studied this problem and attributed the error on the supply side to zoning restrictions. They studied the data from over two dozen American cities and concluded that zoning restrictions kept the housing prices high and did not allow competitive forces to correct the supply and demand position.