Local
land use and state and federal environmental regulations proliferated
in the early 1970s. About this time, US residential construction
productivity began to decline; today, it is close to the level of the
1930s. In contrast, manufacturing productivity has risen for many
decades. In the auto industry, for example, it has risen from 4.8 cars
per employee per year in 1939 to around 25 per employee per year by
2020. In Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation
(NBER Working Paper 33188), Leonardo D’Amico, Edward L. Glaeser, Joseph
Gyourko, William R. Kerr, and Giacomo A. M. Ponzetto investigate the
relationship between restrictive land use regulations and the
residential construction productivity decline. They find that more
restrictive regulation favors smaller projects, artificially limiting
the size of the firms that build homes. Smaller firms invest less in
technology. A back-of-the-envelope calculation shows that if half of the
link between productivity and firm size is causal, homebuilding would
be approximately 60 percent more productive if the size distribution of
US homebuilding firms matched that of firms in the manufacturing sector.