DP14546 The Welfare Effects of Greenbelt Policy: Evidence from England
I measure the economic effects of greenbelts that prohibit new construction beyond a predefined urban fringe and therefore act as urban growth boundaries. I focus on England, where 13% of the land is designated as greenbelt land. I provide reduced-form evidence and estimate a quantitative equilibrium model that includes amenities, housing supply, a traffic congestion externality, agglomeration forces, productivity, and household location choices. Greenbelt policy generates positive amenity effects, but also strongly reduces housing supply. I find that greenbelts increase welfare because amenity effects are sufficiently strong. At the same time, however, greenbelts decrease housing affordability by limiting housing supply.