The influence of land use regulation on the probability that low-income neighbourhoods will gentrify

Abstract

The divergence in housing price growth in the US in coastal cities relative to inland cities has been thought to occur, in large part, due to severe housing regulations and restrictions on development. Researchers have posited that this trend implies that these heavily regulated cities are experiencing higher incidences of gentrification. However, the gentrification of lower-income communities may be negatively influenced by restrictive regulations rather than positively, as is the case with overall housing price growth. This may occur if restrictions make it more difficult to improve housing structures and engage in new housing projects. We use data from over 12,000 census tracts to analyse the relationship between land use regulations and the probability an area will undergo gentrification in the years 2000 to 2010. By separating the influence of higher levels of regulation on overall housing price growth from the likelihood that a lower-income neighbourhood will gentrify, we find that regulation has opposing forces. While increased levels of regulation are associated with an almost 10% greater increase in overall housing prices, they are also associated with a three to four percentage-point lower probability that a lower-income tract will experience gentrification, contrary to previous conclusions.