Public defence, real estate economics, MSc Tea Lönnroth

Title of the thesis: Land-use policy restrictiveness and its influence on housing supply outcomes: New evidence from the Finnish context

Thesis defender: Tea Lönnroth
Opponent: Professor Albert Saiz, Massachusetts Institute of Technology, USA
Custos: Professor Heidi Falkenbach, Aalto University School of Engineering, Department of Built Environment

Restrictive land-use policy may slow the adjustment of housing supply in Finland

Urbanization increases demand for housing, particularly in large urban areas. As population becomes increasingly concentrated in growing cities, a central question is whether enough new housing can be built quickly enough to meet rising demand. One key factor shaping housing supply responsiveness is land-use policy, which determines where, when and under what conditions land can be used for housing development.

This doctoral dissertation examines how land-use policy restrictiveness is associated with housing supply in Finland. Finnish municipalities play a strong role in spatial planning and land development, and their practices may significantly affect how housing construction responds to changes in demand. The dissertation examines the factors that contribute to land-use policy restrictiveness and how restrictiveness is associated with housing supply responsiveness. The study draws on previous literature, expert interviews and statistical analyses, and examines housing supply through both long-run responsiveness and short- to medium-term adjustment.

The findings show considerable variation between cities in how land-use policy tools are used and applied. More restrictive land-use policy is associated with weaker long-run housing supply responsiveness. This is particularly the case for practices that increase indirect development costs through delays or uncertainty in planning and development processes.

The study also finds that housing starts respond more weakly to rising housing prices in cities where land-use policy is more restrictive. In other words, when demand grows and prices rise, new construction may not increase as quickly in areas with more restrictive land-use policy.

The results do not establish a direct causal relationship, but they reveal clear links between land-use policy practices and housing market outcomes. The findings can support the development of municipal land-use policy by helping to identify practices that may unnecessarily slow housing construction and weaken the responsiveness of housing supply.

Thesis available for public display 7 days prior to the defence at Aalto University's public display page.