Effectiveness of housing revitalization subsidies in the presence of zoning

Abstract

This paper examines the impact of zoning on the effectiveness of uniform housing revitalization subsidies. Our analytical results show that, while zoning decreases the marginal return from housing improvements for zoned landlords, it also increases the equilibrium subsidy per housing improvement. This raises the possibility that an increase in zoning stringency can increase the effectiveness of housing revitalization subsidies by influencing the allocation of funds across space. Our simulation analysis presents a case where zoning increases subsidy effectiveness up to 26%. Additional numerical simulations illustrate how this result varies with the degree of zoning stringency, government budget, and the spatial distribution of housing quality.