The Montana Miracle Revisited: Early Evidence on the Effects of Statewide Zoning Reform on Residential Construction

Abstract

In 2023, Montana enacted sweeping zoning reforms—dubbed the "Montana Miracle"—that legalized accessory dwelling units (ADUs) and duplexes statewide. This paper provides the first empirical evaluation of these reforms using both difference-in-differences and synthetic control methods, comparing Montana to control states using monthly building permit data from the Census Bureau's Building Permits Survey (November 2019 through October 2025). The standard DiD estimate suggests a positive but statistically insignificant effect of approximately 3.2 additional building permits per 100,000 population per month. However, synthetic control analysis using 47 donor states finds essentially no effect ($-0.7$ permits/100K), with Montana ranking 20th of 48 states in the placebo distribution (p = 0.958). Event study analysis reveals problematic pre-trends, and the conflicting estimates suggest that credible identification is not achieved with available data. The analysis highlights methodological challenges in evaluating single-treated-unit policy reforms and illustrates why state-level aggregation may be inappropriate when policies vary at the municipal level. Future research should exploit within-state variation using place-level data. \medskip Keywords: zoning reform, housing supply, accessory dwelling units, synthetic control, difference-in-differences, Montana \medskip JEL Codes: R14, R31, R38, R52, H73