We quantify the real estate developer response to a variety of proposed zoning reforms by estimating a flexible structural model of developer behavior using data from Cook County, Illinois. The structural model combines a flexible hedonic model of house prices with revealed preferences of developer behavior, enabling us to evaluate heterogeneous supply-side responses to zoning reforms. We find that a sweeping zoning reform allowing at minimum 3
units on every lot only increases the aggregate housing supply by 3.5 percent, with the average lot having 1.3 units built on it. Development is limited because the revenue from a 3-unit multifamily building typically does not justify the cost of purchasing and demolishing existing single-family homes. Furthermore, an alternative zoning reform to “streamline” the permitting process leads to essentially no new development. In order to see a large supply-side response from up-zoning, cities must either make more vacant land available for residential development or permit much higher density per lot.