Environmental regulations in the United States are intended to improve the quality of the environment; preserve ecosystems, including wildlife; and protect human health. This article considers the impact of regulations such as the Clean Air Act Amendments; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Endangered Species Act; the National Environmental Policy Act; and state and local regulations (including "smart growth" controls) on the U.S. housing market. The extent of the impacts could be measured by looking at changes in house prices and the quantity of housing available. Whether or not environmental regulations are placed directly on the suppliers of housing, it is possible that these regulations will have an impact on the housing market. Environmental laws can impact the supply of land, a key input in the production of housing. Laws can also change the prices of other inputs into the construction of housing (for example, lumber) and can affect the supply of housing in that way. Laws can impact the supply of housing if they increase the amount of time necessary to build housing units or if they increase the possibility of litigation faced by housing developers. On the other hand, if the regulations are effective, they can impact the demand for housing by changing the quality of available housing. All these effects can lead to changes in both the price and the quantity of housing in the market. The academic literature has focused on the increase in the demand for housing due to improvements in environmental quality. Very few studies attempt to estimate the impact on the supply of land or housing. Some researchers examine the issue by interviewing developers and public officials and asking for estimates of cost impacts (for example, James and Muller, 1977). Others use statistical techniques to control for factors that impact sales prices so that the effect of the regulations can be more clearly seen (for example, Frech and Lafferty, 1984). Generally, these studies find that regulations restricting possible uses of undeveloped land lead to decreases in the prices of that land (for example, Guttery, Poe, and Sirmans, 2000), and land near restricted areas can increase in value due to increased demand (for example, Beaton and Pollock, 1992). To better understand the impact of environmental regulations on the housing market, research must be extended in several directions. Studies that use statistical techniques to examine the housing market both before and after regulations are put in place are necessary. Although the data requirements of such studies are large, the results will estimate the extent of the increase in prices due solely to the regulations. If policy analysts want to know whether the increase is due to a decrease in housing supply, an increase in housing demand, or a combination of the two, the results from such studies can be used in a "second stage" estimation of separate housing supply and demand equations. Research also needs to estimate the amount of land removed from the housing market due to environmental restrictions. Landis (2001) has undertaken such a study in California; his work should be extended to other areas. He demonstrated the importance of estimating how much of the land that is removed would be "developable," as well as how the removal impacts the ability of the area under study to grow. Finally, research should examine the general equilibrium impacts of environmental laws on all markets because the housing market also is affected by the labor market. Riddel (2001) estimated this type of model and showed that open space purchases in Colorado increased the demand for housing by more than they reduced the supply of housing. If regulations lead to increases in housing prices that make housing unaffordable, the next step would be to consider how to make the regulations less costly or how to subsidize those most affected by the price increases.
