Reassessing the Impact of Local Control: When Smaller Local Governments Permit More Housing
2025-06-12
Housing scarcity is a widespread social and economic problem. Prior studies have attributed this scarcity to local control over land use, which has been seen as making policy makers more responsive to small electorates. Challenging this argument, we suggest that smaller jurisdictions have stronger incentives and greater capacity to raise tax revenue by building housing. Therefore, expanding the electorate that policy makers are responsive to could lead to a more restrictive housing policy. To explore this question empirically, we study a reform that consolidated some Danish municipalities, increasing the size of their jurisdiction. Using a difference-in-differences design, we find that consolidated municipalities issue fewer permits and complete less housing than smaller jurisdictions. Our study thus shows that politicians permitted more housing when they were accountable to a smaller electorate. This upends conventional wisdom and suggests that local control need not be at odds with more liberal land use policy.