Reactive Land Use Controls: a Simulation Study

This study assesses the macroeconomic effects of minimum-lot-size requirements and building permit caps that have been implemented by some of the suburban municipalities in the Chicago metropolitan area. This is accomplished by using the spatial regional econometric inputoutput framework, which overcomes the shortcomings of traditional top-down approach to vertical regional economy – land use integration. The model simulation results reveal that the reactive land use regulations (minimum lot size zoning and permit caps), which bind local housing supply and population growth within the jurisdictions, 1) dampen the pace of regional economic growth considerably, although the actions are sometimes favorable to the long-term prosperity of the individual implementing municipalities; 2) tend to generate disproportionate impacts on different sectors of the economy – i.e. local sectors, which heavily depend on household expenditures, are affected more strenuously; and 3) induce effects that vary substantially by location and timing of the implementation.