The impacts of density regulation on cities and markets: Evidence from Mumbai

Land use regulation exists in various countries in various forms. Density regulation is a class of urban land use regulations aimed at controlling development on urban land. Although it is justified on several grounds, the adverse impacts of such regulation on cities and markets have not received much attention of policy and decision-makers. In a burgeoning metropolis like Mumbai, for example, where land and housing needs are very high, regulations like these constrain the housing supply through a reduction in the available built space. This, in turn, results in widely varying impacts: it would have constrained the operation of land (and housing) markets, resulting in high cost of real estate; it would have also impacted on the city, in terms of the adverse effect on housing affordability, location, and extent of informal and poor-quality housing, and the resulting of crammed conditions. Further, density regulation might have aided the displacement of poor spatially into disadvantaged housing due to the filtering process operating through a mechanism of high land prices. Moreover, it would have spurred investment in property taking speculative dimensions, making it worthy to hold built-up land and housing units. Finally, high land prices in Mumbai gave excessive returns to the factor of land, which could be deployed to the rent-seeking activities.