Data Confirms Relaxing Land Use Restrictions Drives Down Housing Costs

Relaxing land use restrictions benefits real estate developers, renters, and homebuyers, according to several recent studies. Although concerns exist that building more housing could do more harm than good when it comes to affordability, the data confirms that the principle of supply and demand also applies to the housing industry.

Boosting supply is essential to lowering or moderating housing costs. More available housing can also diminish competition among tenants, which can slow rent increases and even downward pressure on rents. New housing construction can also trigger a “vacancy chain” effect. Commercial zoning regulations play a crucial role in determining where and how new housing developments can be built. When tenants vacate their old apartments and move into new units, it frees up older units, which are typically more affordable, and can lead to a reduction in prices for these units. 

New Data on Falling Rent in Pro-Housing Cities

Several cities across the country have recently adopted policies aimed at increasing housing supply. According to data from real estate investment firm Five Star Cash Offer, these metropolitan areas experienced the most significant year-over-year decline in rental prices nationwide. 

The study analyzed rental prices for the top 65 metropolitan areas in the United States from January 2024- January 2025. Here’s what the data shows:

Sarasota, Florida: The city saw the largest annual decline. From January 2024 to January 2025, average rent in Sarasota fell from $3,290 to $1,886 per month. Over the past several years, the City Commission has taken several measures to address the city’s housing crisis, such as easing restrictions on mixed-use and higher-density developments and allocating $40 million for affordable housing projects.

Providence, Rhode Island: The city recorded the second-highest year-over-year decline, a 19.22 percent drop in monthly rent, from $2,513 to $2,030. The city’s efforts to deregulate the housing industry include a legislative package aimed to “address the long-lagging housing production rates” in the state by streamlining permitting for land use and land development and easing restrictions around repurposing existing structures for housing. Providence also overhauled its construction application process in 2024. Understanding construction law requirements helps developers navigate these streamlined permitting processes effectively.

Several other cities that saw significant rent rate declines, including Cape Coral, Florida, Austin, Texas, Minneapolis, Minnesota, have enacted zoning reforms and are issuing permits at or above their pre-pandemic rates.

Additional Research Confirms Boosting Supply Slows Rent Increases

Research studies have also found evidence that building more units can slow rent growth in major cities. In 2023, a NYU Law & Economics research paper that found new housing supply reduces rents or slow the growth in rents in the region. In some circumstances, new construction also reduces rents or rent growth in the surrounding area.

While new supply is associated with measures of gentrification, studies show that it generally does not heighten displacement of lower income households. Rather, the chains of moves resulting from new supply free up both for-sale and rented dwelling units that are then occupied by households across the income spectrum, and provide higher income households with alternatives to the older units for which they might otherwise outbid lower income residents.

Key Takeaway

Real estate development is a lucrative yet high-risk endeavor. Commercial real estate law expertise becomes essential when navigating the complex legal landscape of development projects. By enacting laws, rules and regulations that make housing development and operation more expensive, local governments can exacerbate existing housing issues.

Given the latest data, we are hopeful that state and local governments will help meet the demand for more housing by revising zoning regulations, streamlining the permitting process, and incentivizing development. To stay on top of the latest developments and determine how they may impact your business, we encourage you to consult with a member of Scarinci Hollenbeck’s Commercial Real Estate Practice.