Teardowns, popups, and renovations: How does housing supply change?

Abstract

AbstractCities grow in layers over time. As population and land values increase, older, smaller buildings are replaced with higher density, higher value structures. However, direct costs of redevelopment and institutional barriers such as zoning may constrain replacement of older structures, leading to alternate forms of supply adjustment. In this paper, I use data on building permits in Washington DC to examine three different forms of residential investment: new construction, expansion of existing structures, and renovation. Results suggest that new construction accounts for a relatively small part of residential investment and is highly concentrated in a few neighborhoods. Expansions and alterations of existing structures are more frequent and more evenly dispersed across space. Recent increases in housing values are correlated with more new construction, but only among neighborhoods with relatively more permissive zoning. Additions and alterations are more prevalent in neighborhoods with high property values, older housing, and more restrictive zoning.