The Effects of Zoning and Local Regulatory Environment on Housing Prices and Foreclosure Risk

点击翻译按钮获取中文摘要

This project focuses on whether and how characteristics of local zoning and regulatory environment are related to foreclosure risks. Despite the strong interest of local governments in reducing the impact of the recent surge in foreclosures, little is known about how the policy tools available to local jurisdictions can be used to minimize the risk of foreclosure. Research on determinants of foreclosures has concerned primarily on tracing the risk-taking behavior of borrowers and lenders, lending-related policies, and poorly regulated financial markets. A small but growing body of literature presents a clear link between housing price, housing supply, and foreclosure. This project will explore the implied connections between foreclosure risk and land-use regulation. The investigator posits that when zoning restricts the supply and diversity of housing types and affordability, homebuyers may be forced into a higher price category and consequently may have a higher vulnerability to foreclose. This can be especially true under additional adverse conditions (trigger events), such as when there is a decline in homeowner income or housing value. This phenomenon may have been exacerbated by increased access to subprime lending instruments during the recent housing bubble and subsequent burst. The investigator will examine these connections through the following research questions: (1) How are the zoned housing capacities and diversity of zoned housing types in an area related to higher rates of housing price escalation? (2) Controlling for other factors, are areas with high rates of sub-prime mortgage activity associated with local regulatory characteristics and changes in housing prices? (3) To what degree did regulations and housing price escalation contribute to the vulnerability of homeowners to foreclose? As municipalities are most often the government entities responsible for zoning decisions, he will examine these relationships primarily at the municipal level using multiple metropolitan areas in the United States. He also will look at the ZIP-code and individual parcel-level associations within these municipalities to test the theoretical associations suggested by the literature on zoning and housing price at these scales. Because foreclosure risk may be affected by factors beyond a spatial unit, he will apply spatial autoregressive models (spatial lag models) and multi-level regression models to analyze interactions across geographical boundaries and hierarchical scales.This project will address the gap in current research related to local conditions by systematically including zoning policies affecting housing production and supply into the foreclosure risk analysis. Project findings will provide important evidence to facilitate consideration of more robust policy interventions and to help foster communities more resilient to future shocks. The framework and findings of this project will be disseminated widely through academic and policy venues and will add to the tools that can help identify affordable housing shortages and areas of concentrated risk.