This one from Matthew Yglesias is good, if a bit naive.
This one from Virginia Postrel has a good summary of the research documenting the steep price of California-style zoning:
Some of the higher price of L.A. real estate does reflect the intrinsic pleasure of living there, as I’m reminded every time I walk out my door into the perfect weather. Some of the price reflects the productivity advantages of being near others doing similar work (try selling a screenplay from Arlington, Texas). All of these benefits—and the negatives of traffic and smog—are reflected in the price of land.
But what exactly is that price? Consider two ways of computing the price of a quarter acre of land. You can compare the value of a house on a quarter acre with that of a similar house on a half acre. Or you can take the price of a house on a quarter acre and subtract the cost of the house itself—the price of construction. Either way, you get the value of an empty quarter acre. The two numbers should be roughly the same. But they aren’t. The second one is always bigger, because it includes not just the property but the right to build. Expanding your quarter-acre lot to a half acre doesn’t give you per- mission to add a second house.
In a 2003 article, Glaeser and Gyourko calculated the two different land values for 26 cities (using data from 1999). They found wide disparities. In Los Angeles, an extra quarter acre cost about $28,000—the pure price of land. But the cost of empty land isn’t the whole story, or even most of it. A quarter- acre lot minus the cost of the house came out to about $331,000—nearly 12 times as much as the extra quarter acre. The difference between the first and second prices, around $303,000, was what L.A. home buyers paid for local land-use controls in bureaucratic delays, density restrictions, fees, political contributions. That’s the cost of the right to build.
And that right costs much less in Dallas. There, adding an extra quarter acre ran about $2,300—raw land really is much cheaper—and a quarter acre minus the cost of construction was about $59,000. The right to build was nearly a quarter million dollars less than in L.A. Hence the huge difference in housing prices. Land is indeed more expensive in superstar cities. But getting permission to build is way, way more expensive. These cities, says Gyourko, “just control the heck out of land use.”
(Read it for this. I don't agree with her "red-state/blue-state" theory of zoning.)
Update: Postrel has posted a follow up to her article with some neat charts.
