The Cost of Code Violations: How Building Codes Shape Residential Sales Prices and Rents

Abstract

ABSTRACTExisting literature suggests a positive correlation between building codes and housing prices. Yet studies rarely differentiate between resolved and unresolved code violations, or between residential sales prices and rent prices. As such, there are gaps in our knowledge about the landscape of housing regulations, which have particular relevance for understanding barriers to housing affordability and equity. To begin to fill these gaps, I present statistical analyses of building code violations data and housing market data in Chicago. Whereas resolving building violations does increase rents, I find no significant effect on residential sales price. And, although unresolved code violations decrease residential sales price, there is no significant effect on rent prices. Considering these results, I suggest that code violations reinforce the divide between wealthy and poor homeowners and exacerbate the existing lack of affordable housing options for renters. Overall, the article draws attention to the variation in effects of housing regulations in practice. I contend that it is crucial to understand the varied relationships between regulations and the housing market to make a dent in housing inequality.