Paving the Swamp: Cost of Land Use Regulation (Joint with Hannah Druckenmiller and Joseph S. Shapiro)

• Environmental and Energy Economics Workshop

Date and Location

Wednesday, May 10, 2023, 4:10 PM - 5:30 PM

Abstract

How does environmental regulation of land use affect the economy and the environment? We study restrictions on the development of US water resources under Section 404 of the Clean Water Act, a controversial regulation subject to Supreme Court challenges, presidential rule changes, and litigation from 41 states. Exploiting a regulatory change by the Trump administration that narrowed the Clean Water Act's scope, we obtain four findings. First, the Trump rule significantly increased permitting and development activity around wetlands. Second, lands that became less likely to be regulated under the Clean Water Act increased in value by ~10%. Third, the quantity of sales of wetland properties increased in response to the rule change. Fourth, deregulation leads to on-the-ground change, increasing built-up area and reducing wetland area. This paper highlights the importance of land markets in assessing the costs and benefits of land use regulation.