Welcome! I am an Assistant Professor of Finance and Real Estate at the University of Colorado Boulder (Leeds School of Business).

My research interests are Urban and Real Estate Economics, Public Economics, and Industrial Organization. My current research studies zoning regulations in the United States.

Email: jaehee.song@colorado.edu

 
 

This paper examines the effects of minimum lot area restrictions on housing prices, construction, and residential sorting in the United States. First, I develop a structural break detection algorithm to estimate neighborhood-level minimum lot areas nationwide and provide new evidence on the prevalence and restrictiveness of residential zoning. Second, I use a spatial discontinuity design to evaluate the impact of minimum lot area restrictions. I find that doubling the minimum lot area increases sales prices by 14 percent and rents by 6 percent and reduces housing density by 37 percent. Third, I develop a model of housing demand and supply to estimate households' preferences for neighborhood zoning stringency and regulatory costs in housing construction. I find that white households have strong preferences for strict zoning in their neighborhoods. I use the estimated model to evaluate a counterfactual zoning reform that halves minimum lot areas in Connecticut. The reform would substantially increase the supply of small and cheap homes and benefit racial minorities, while minimally affecting existing home values.

Why Zoning is Too Restrictive

with Jack Favilukis

Work In Progress

Hsieh and Moretti (2019) estimate that zoning restrictions lowered aggregate growth by 36%. If such restrictions are so costly, why do they exist? We propose a novel theory for why zoning restrictions exist and are more stringent than the social optimum, considering their effects on housing affordability and congestion. The more administrative entities who each make their own zoning decisions that a metro is split into, the more restrictive zoning is in the metro. When zoning decisions are made locally, voters choose restrictive zoning due to local congestion externalities, but fail to internalize the effects of restrictive zoning on metro-level affordability. We find strong empirical support for this prediction. Our analysis also provides policy implication that state- or federal-level intervention is necessary to achieve the socially optimal level of zoning. Indeed, facing housing affordability crises, several cities, states, and nations have begun to adopt global zoning reforms.

Historians document that suburban communities historically set stricter zoning laws to prevent the inflow of racial minorities. They argue such practices were especially common in response to transportation developments, which allowed minorities to more easily access suburban communities. In this project, I study the effect of increased potential inflow of racial minorities on the stringency of residential zoning by leveraging variations in transportation networks and out-migration shocks. To do this, I assemble a data set on the railroad and highway networks during the 1900s. I first estimate a model of migration using 1935 to 1940 migration flows. Then, I use the estimated model to predict the inflow of Black households from 1940 to 1970 given the change in transportation networks and economic conditions in their prior locations. My preliminary findings indicate that municipalities that expected more Black inflow imposed stricter minimum lot area regulations.