Site density restrictions: Measurement and empirical analysis

Restrictions on the density at which development can occur are a central tool of land use regulation. Yet, they are understudied in the empirical literature. In this paper, we present a methodology to identify how much restrictions on the ratio of building space to lot area constrain developers. Our approach generates a measure of the distortion from the private optimum caused by restrictions as a function of land prices and the maximum allowed ratio of floor space to lot area. We use this methodology to examine how the set of incentives facing different levels of local government in Shanghai, China, affects density constraints on redevelopment sites in the city's emerging real estate market. (C) 2000 Academic Press.