Measuring the Stringency of Building Height Regulations

ABSTRACT This study proposes a novel methodology to measure the stringency of building height regulations. This measure gauges the difference in building heights with and without regulations. The primary challenge is to recover unobserved building heights in the absence of regulations. I develop a dynamic discrete choice model of building height decision‐making by parcel owners and conduct a counterfactual experiment that removes height regulations. An application to residential buildings in central Tokyo presents three findings. Without height restrictions, the number of stories would increase by 2.7%, and housing prices would change by 3.7%. Regulatory stringency is stronger near the central area, while the static model tends to overestimate it.