The Effects of Minimum-Lot-Size Reform on Houston Land Values

Emily Hamilton
Mercatus Center at George Mason University

In 1998, Houston policymakers cut minimum-lot-size requirements by about two-thirds—from 5,000 square feet to 1,400 square feet—within the center city. A 2013 expansion of this minimum-lot-size reform is the policy change at the center of this study. Relative to recent zoning changes intended to facilitate denser construction in single-family neighborhoods, such as those in Minneapolis and Oregon, Houston’s reform has received less media attention but has facilitated greater rates of construction. One concern critics raise about increasing property owners’ development rights is that the resulting greater option value of the land may increase the prices of the existing stock of housing, with the potential to worsen housing affordability, at least in the short term. This study uses a difference-in-differences design to estimate the effect of the 2013 reform on land values. Across many specifications, no evidence emerged that the reform increased land values, and in some models, the evidence showed that the reform reduced land values relative to land in the control group. This result may have occurred because Houston’s reform has facilitated a large amount of housing construction. The downward pressure on rents due to increased housing supply—and downward pressure on land values as a result—may offset the effect of an increase in land’s option value.