The Impact of Density Bonus Policy on Housing Supply in Massachusetts

• In Event: Zoning, Regulations, and Housing Supply

Abstract

Several of the most populous cities in the United States are experiencing eroding housing affordability, driven by lack of adequate housing supply. In response, federal, state and local governments have developed a variety of policy interventions designed to increase housing supply, and in particular, to increase the availability of housing affordable to households with low or moderate incomes. Through quantifying crowd out and local price spillover effects of the Low-Income Housing Tax Credit, economic research has contributed to better understanding of this one very prominent example of an affordable housing development incentive.

This research project analyzes a less well studied type of intervention—density bonuses—which promotes affordable housing development by relaxing restrictions on residential density and streamlining permit approvals for developers who build units to be rented or sold at below-market prices. This projects builds on previous work by Hector Blanco and Noemie Sportiche evaluating effects of Chapter 40B, a Massachusetts state-level policy which is the oldest and longest density bonus policy in the country.

Relying on information on Chapter 40B developments compiled in Blanco and Sportiche’s previous work as well as an inventory of Massachusetts residential and mixed-use properties (provided by the Warren Group), I implement a staggered difference in differences framework to quantify Chapter 40B's impact on housing supply, with a focus on measuring local spillover effects on construction activity. This project contributes to our understanding of crowd out in affordable by examining the phenomenon at a finer level of geography than has been explored in previous literature. This project also contributes to understanding of local spillovers in housing more generally by focusing on spillovers on quantities of housing as opposed to prices. 

Preliminary results from this work suggest that while 40B does exhibit some local crowd out of single family housing, overall in this setting the policy has exhibited a lot less crowd out than the literature cites for Low-Income Housing Tax Credit units, likely due to the fact that the direct effect of 40B’s relaxed zoning allows for many more units to be constructed on a given plot of land, thereby allowing this direct effect to easily overcome spillovers on local residential construction.

This presentation might fit well with the "Local Government Approval for Single versus Multifamily Development" by Agustin Leon-Moreta (University of New Mexico), which is listed in the single-paper listings.

Author

• Aja Kennedy, Tufts University
  Presenting Author