When Local Control Leads to More Housing

• In Event: Home Is Where the City Is: Supporting, Defending, and Designing Urban Housing

Abstract

Housing affordability is a widespread social, economic, and political problem. Scholars often attribute this affordable housing crisis to local control over land use. Challenging the prevailing belief that increasing local control leads to more restrictive land use, this study argues that the relationship between local control and land use is contingent upon how the institutional structure shapes the incentives of local governments. If local governments can expand their tax base by attracting new citizens, local control will lead to a city interest in more housing. To explore this argument, we study a Danish reform that significantly increased the jurisdiction size of some municipalities, diluting local control. Drawing on Danish registry data, we built a balanced panel dataset on housing permits from 1995-2020, including precise information on how much overall construction was permitted and completed in each municipality in total, and across different types of housing. We then measure the causal effect of the reform using this dataset by estimating a series of multi-period difference-in-difference models, comparing changes in land use policy before and after the reform. In line with our argument, the analysis shows that affected municipalities permitted and completed less housing: reduced local control meant fewer new homes. The findings presented here add important nuance to contemporary discussions over the politics of housing, and should give pause to anyone who hopes to ameliorate the affordability crisis by centralizing power over land use policy. If localities’ reluctance to develop new housing is driven by the political power of local NIMBY (not-in-my-backyard) homeowners, our results suggest that their ability to exercise this power is somewhat independent of local control. Centering the role of local institutions and processes, this study thus illustrates the ways in which research on the politics of housing must take variation in institutional context into account. As such, this work emphasizes that moving beyond the special interests of developers or homeowners, and focusing on city interest, might lead to a more nuanced understanding of the relationship between local control and policy outcomes.

Authors

• Martin Vinæs Larsen, Aarhus University

• Laura Kettel, Aarhus University