A special report from the Samuel Zell/Robert Lurie Real Estate
Center at the Wharton School of the University of Pennsylvania:
Joseph Gyourko, Director and Bucksbaum Professor of Real Estate
and Finance and Anita A. Summers, Director of Research and
Professor Emeritas of Real Estate, and Business and Public
Policy. Land-use regulations have played a significant role in
explaining the increase in house prices over the past quarter of
a century across the country. Traditionally the price of land
has accounted for only a small portion of housing costs but its
share is growing substantially. This means that it is not demand
alone that is accounting for the higher house values—the supply
has become more inelastic. One possible explanation for the
inelastic supply is the increased adoption of land-use
regulations that limit building activity in local communities.
Another is that we have run out of land. It has been hard to
sort out the explanation, because we have had very little direct
knowledge of the local regul