Environmental Land Use Regulation and the ESA’s Housing Costs
Maxwell Tabarrok’s paper (Journal of Public Economics, 2026) measures the causal effect of the Endangered Species Act (ESA) on U.S. housing supply, exploiting the timing and geography of species listings as a natural experiment. 1
Key finding
Each endangered species listing reduces annual housing permit flows by 0.5 permits per thousand residents (~10% of the average annual flow) in the areas where that species lives. Aggregating over all listings since 1980, the ESA has displaced or deterred an estimated 9.1 million housing permits, with roughly 70% of that effect coming from deterred permits that never reappear elsewhere — a net reduction of the U.S. housing stock by ~6.3 million units (~4% of 2025 housing stock). 2
Identification strategy
The ESA prohibits “harming or harassing” listed species, which extends to land clearing and construction near their habitats. Since listings vary over time (82 species in 1970 → ~1,500 today) and habitats vary across space, each listing creates a treatment group (places with habitat) and control group (nearby places without). Tabarrok uses a staggered difference-in-difference design across 1,200+ listings from 1980–2024, plus:
- Geographic fixed effects (within-state and within-metro comparisons)
- Matching (propensity score, entropy balancing) to construct comparable control groups
- De-listing reversals — species removals increase permits by roughly the same magnitude, confirming causality
- Dose-response — critical habitat listings (strongest regulation) show the largest effects; proposed (not-yet-enforced) listings show zero effect
The infill problem
Satellite land-use data (NLCD) shows the ESA constrains both greenfield and infill development. This matters because the most urbanized 15% of places produce 90% of permit flows, while the highest-value endangered species habitat is far outside those areas. The ESA restricts construction in already-developed areas where the habitat-protection rationale barely applies — potentially a lose-lose for housing and species alike. 3
Policy implication
Relaxing the ESA’s bite specifically on infill and redevelopment in already-built-up areas could increase housing supply in dense, energy-efficient cities without sacrificing meaningful endangered species habitat — a potential Pareto improvement that would satisfy both housing advocates and environmentalists. 4
Context
Published in the Journal of Public Economics (2026). DOI: 10.1016/j.jpubeco.2026.105743. The Trump administration’s proposed rescission of the ESA’s “harm” definition makes this especially timely.
Related
- institutionally-constrained-technology-adoption — why regulations persist even when they’re socially costly
- demand-governance-wedge — gap between private adoption demand and governance preferences
- universal-basic-income — housing costs are a driver of welfare policy debates
- limits-to-growth — environmental regulation as a constraint on economic expansion
Sources
- Tabarrok, “The Costs of Environmental Land Use Regulation” (2026)
- Alex Tabarrok, “The Endangered Species Act Reduces Housing” (2026-07-30)