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Land-Use Regulation, Income Inequality and Smart Growth

A recent paper by Harvard economists Daniel Shoag and Peter Ganong titled, Why Has Regional Convergence in the U.S. Stopped? indicates that land development regulations tend to increase housing costs, which contributes to inequality by excluding lower-income households from more economically productive urban regions. Does this means that planners are guilty of increasing income inequality?

Todd Litman | July 26, 2012, 11am PDT
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A recent paper by Harvard economists Daniel Shoag and Peter Ganong titled, Why Has Regional Convergence in the U.S. Stopped? indicates that land development regulations tend to increase housing costs, which contributes to inequality by excluding lower-income households from more economically productive urban regions. Does this means that planners are guilty of increasing income inequality?

Smart growth critics imply that virtually any policy intended to influence development patterns reduces economic development and opportunity. For example, columnist Virginia Postrel used this to label economist Paul Krugman elitist (why him?), and Randall O'Toole used it to criticize urban planners, claiming, "Of course, many urban planners still refuse to believe that land-use regulation makes housing expensive."

But the research actually indicates something quite different than what critics imply. Many of the development restrictions reflected in this analysis are old, sprawl-inducing restrictions on development density and multi-family housing supported by local residents, rather than progressive, smart growth policies intended to support more compact development supported by planners. Shoag and Ganong used the Wharton Residential Land Use Regulatory Index and other studies, which indicate that regulatory intensity is:

  • Negatively correlated with population density. Lower density towns tend to have the strictest regulations.
  • Lower in central cities than suburbs.
  • Strongly positively correlated with indications of wealth (median family income, median house value and share of adults with college degrees).
  • Higher in coastal states than in the Midwest and Southern states. This probably reflects a combination of natural development restrictions (such as shorelines and mountains).
  • Positively correlated with direct community democracy in the form of town meetings that require land use issues to be put to popular vote.


It is true that some smart growth policies increase unit land costs (cost per acre), but others increase affordability by reducing per unit land requirements, reducing parking costs, and reducing transport costs, as indicated in the following table:

Smart Growth Household Affordability Impacts

Reduces Affordability

Increases Affordability

  • Urban growth boundaries (reduces developable land supply).
  • Increases infrastructure design requirements (curbs, sidewalks, sound barriers, etc.).
  • Higher density development (reduces land requirements, increases land supply for housing.)
  • Reduces parking and setback requirements (reduces land requirements per housing unit).
  • More diverse, affordable housing options (secondary suites, apartments over shops, loft apartments).
  • Reduces fees and taxes for clustered and infill housing (if Smart Growth includes pricing reforms).
  • More accessible housing reduces transport costs.

Many Smart Growth strategies can increase housing affordability.


Housing affordability and economic opportunity are important planning objectives but they should not be considered in isolation. Rational planning favors "win-win" housing affordability strategies that also help reduce transportation costs, reduce traffic and parking congestion, increase traffic safety and public health, improve accessibility for non-drivers, and protect environmental quality. These include:

  • Allowing increased land use density and mix in accessible, multi-modal areas (walkable and transit-rich areas).
  • Reducing minimum parking requirements and supporting more efficient parking management.
  • Locating public facilities and services (schools, parks, shops, etc.) where they are accessible without a car.
  • Reduce development and utility fees for more compact development, reflecting the lower costs of providing public services in more accessible locations.
  • Improve affordable transport modes (walking, cycling, public transit and carsharing).


It is inaccurate to suggest that smart growth policies are the main cause of housing unaffordability: there may be correlation since smart growth policies tend to be implemented most in regions that have a combination of rapid growth, geographic constraints on development and high environmental amenities (such as shorelines, mountains or limited water supply), which tend to increase housing prices due to a combination of strong demand and limited land supply, but this does not prove causation. Put differently, high housing costs in these areas likely reflect the implementation of some smart growth policies, such development restrictions, without others that increase housing affordability such as increased allowable density, and reduced parking requirements and traffic impact fees in more accessible locations. The best solution, therefore, is more rather than less smart growth.

It is also inaccurate to claim that the restrictive regulations that reduce housing affordability are instigated by planners; on the contrary, progressive planners work hard to reduce unnecessary regulations and encourage more affordable development - after all, on a typical planner's wage that could be our home! However, we face resistance from local residents who fear change, particularly infill development.


For more information

Affordable Housing Design Advisor Website (, sponsored by the U.S. Department of Housing and Urban Development, provides information on developing more affordable housing, redeveloping urban communities and implementing smart growth.

AIA (2010), Promoting Livable Communities: Examining The Internal Revenue Code And Reforming Its Influence On The Built Environment, Smart Growth America ( ) and the American Institute of Architects; at

Ariel Bierbaum, Jeffrey Vincent and Deborah McKoy (2010), "Linking Transit-Oriented Development, Families and Schools," Community Investments, Vol. 22, No. 2: Summer, Federal Reserve Bank of San Francisco; at

CNT (2006), Paved Over: Surface Parking Lots or Opportunities for Tax-Generating, Sustainable Development? Center for Neighborhood Technology (; at

CTOD (2009), Mixed-Income Housing Near Transit: Increasing Affordability With Location Efficiency, and Mixed-Income Housing TOD Action Guide, Reconnecting America and the Center for Neighborhood Technology (; at

Deborah Curran and Tim Wake (2008), Creating Market and Non-Market Affordable Housing: A Smart Growth Toolkit for BC Municipalities, Smart Growth BC (; at

Jonathan Ford (2009), Smart Growth & Conventional Suburban Development: Which Costs More? U.S. Environmental Protection Agency (; at

HousingPolicy.Org ( is an online guide by the Center for Housing Policy that provides information on and examples of policies that increase housing affordability.

HUD (2008), Impact Fees & Housing Affordability: A Guide for Practitioners, Office of Policy Development and Research, Department of Housing and Urban Development (; at

Marc Lee, Erick Villagomez, Penny Gurstein, David Eby and Elvin Wyly (2008), Affordable EcoDensity: Making Affordable Housing a Core Principle of Vancouver's EcoDensity Charter, Canadian Center for Policy Alternatives (; at

Jonathan Levine (2006), Zoned Out: Regulation, Markets, and Choices in Transportation and Metropolitan Land-Use, Resources for the Future (

Todd Litman (2007), Evaluating Affordability for Transportation Planning, Victoria Transport Policy Institute (; at

Todd Litman (2009), Smart Growth Reforms, VTPI (; at

Todd Litman (2009), Where We Want To Be: Home Location Preferences And Their Implications For Smart Growth, Victoria Transport Policy Institute (; at

Todd Litman (2010), Affordable-Accessible Housing In A Dynamic City: Why and How To Support Development of More Affordable Housing In Accessible Locations, Victoria Transport Policy Institute (; at

Todd Litman (2011), Critique of the National Association of Home Builders' Research On Land Use Emission Reduction Impacts, Victoria Transport Policy Institute (; at

Todd Litman (2012), Debating Smart Growth, Planetizen (; at

NMHC (2007), Overcoming Opposition To Multifamily Rental Housing, National Multi Housing Council (; at

Dan Parolek (2012), Missing Middle Housing: Responding To Demand For Urban Living, Better Towns and Cities (; at

USGBC Affordable Housing Initiative (, US Green Building Council. Provides guidelines for creating more energy efficient affordable housing.

Vancouver EcoDensity ( is an integrated program to increase urban livability, affordability and environmental performance through policy and planning reforms that encourage more compact, mixed, infill development.  

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