What happens when part of a city cuts minimum lot sizes? This paper studied a 2014 reform where a council in Adelaide cut them from 350 sqm to as low as 150 sqm, until the policy was partly reversed in 2019. The reform increased building approvals by 67%, driven entirely by townhouses and rowhouses; the reversal returned the treatment effect to insignificant levels, providing dose-response evidence that lot-size regulation was a binding constraint. 

Key findings

• Established local firms already producing medium-density housing primarily built the new homes, with no evidence of capacity diversion. 
• Movers into new housing were predominantly households in their prime family-formation years, upgrading out of cheaper rental housing. 
• Using linked Census microdata, the movement chains they set off are traced: each mover vacates a cheaper dwelling, occupied by a household further down the income distribution.
• Chains also track the lifecycle: occupants further along the chain are younger and more often renting. 
• Concerns about amenity costs drove the reform’s reversal; across the outcomes measured little deterioration was found.