Measuring the Stringency of Land-Use Regulation: The Case of China's Building-Height Limits

Measuring the Stringency of Land-Use Regulation: The Case of China's Building-Height Limits

The Review of Economics and Statistics

Jan K. Brueckner, Shihe Fu, Yizhen Gu, Junfu Zhang

Abstract

This paper develops a new approach for measuring the stringency of a major form of land-use regulation, building-height restrictions, and applies it to an extraordinary dataset of land-lease transactions from China. Our theory shows that the elasticity of land price with respect to the floor-area ratio (FAR), a building-height indicator, is a measure of the regulation's stringency (the extent to which FAR is kept below the free-market level). Using a national sample, estimation allowing this elasticity to be city-specific shows variation in the stringency of FAR regulation across Chinese cities. Single-city estimation for Beijing shows that stringency varies with site characteristics.

Keywords: Floor-area ratio; Density restriction; Urban development; China

JEL classification: R14; R52