Zoning has an honorable history but is being over-used by local communities to block new housing development in ways that exacerbate sprawl and social inequity, according to Zoning Rules! The Economics of Land Use Regulation, a new book published by the Lincoln Institute of Land Policy.
In a definitive economic, political, and legal account of local land use regulation, author William A. Fischel, a professor at Dartmouth College, reveals how homeowners seeking to protect their investment have made development difficult and costly.
“State, federal, and judicial interventions to control local zoning have done more harm than good. To help grow the economy, decrease inequality, and improve the environment, America needs to take the wind out of the sails of local land use regulation,” Fischel says.
For a century, zoning has been a useful and popular institution, enabling cities to chart their own course and homeowners to protect their main investment and provide safe neighborhoods. But as residential real estate prices have soared in recent years, Fischel says, concern about home values has created barriers to growth -- contributing to suburban sprawl, entrenching income and racial segregation, and slowing the growth of the American economy.
Once dismissed by economists as a paper tiger, municipal zoning is now regarded as a major influence on the development of American cities. Zoning Rules! explores the behavioral basis as well as the economic effects of local government land use regulation. This requires not just an economic model of how zoning works but a deeper understanding of the social, political, and technological factors that guided its history over the last century. Zoning’s popularity is due to its success in protecting the value of single family homes, and anti-sprawl reforms must take this into account.
Among the key takeaways from Zoning Rules:
-- Curtail federal tax subsidies to owner-occupied housing, beginning with the home mortgage interest deduction. For tax purposes, housing should be treated like any other investment in terms of both its annual stream of services and its capital gains. “Economists should understand that reforms in that direction are not just about getting more revenue and leveling the playing field among types of capital taxation,” he writes. “The housing subsidy is most likely the major political basis for excessive land use regulation. Bringing the inflated owner-occupied housing sector down to earth would moderate the NIMBY syndrome and make public demands for land use regulation more reasonable.”
--Take it slow on urban growth boundaries. Portland, Oregon, seems to have found a means of achieving infill development despite NIMBY sentiment, but constraining growth boundaries undermine local governments outside the pale and may cartelize the housing market, making the region less attractive and productive than it might be if exurban growth were simply charged its marginal cost.
-- Re-assess concern about exactions. Courts and legislatures should be aware that new development can have public impacts that are greater than previous developments; the sequential nature of most development inevitably means that latecomers will be more burdensome than those that came earlier.
-- Abolish rent control, which can reduce the supply of rental housing, driving more people into the owner-occupied sector and fueling more NIMBYism. Acknowledging political initiatives to cut back on rent control, Fischel suggests that “this is an instance in which the regulatory takings doctrine might be profitably deployed at the state level.”
-- Re-examine the use of conservation easements for their impact on urban structure as well as their environmental benefits. Where urban development is possible, “perpetual easements are the worst form of suburban exclusion, in that they push development to remote areas and increase inefficient sprawl,” he writes.
-- Play down the threat of monetary damages as a remedy for exclusionary zoning. Pennsylvania’s substantive due-process approach, which relies on injunctive remedies rather than financial penalties, makes developers allies with affordable-housing advocates without threatening the solvency of local governments.
Fischel also writes that “the federal government should stop abetting parochial growth control schemes with false alarms about running out of farmland and other sky-is-falling issues. It should also limit litigation about environmental issues to parties that have an ongoing stake in the issues. Mostly, though, the federal role should be to leave the states alone.”
And he concludes with an inversion of Daniel Burnham’s famous dictum, by suggesting that communities should “make only little plans.” Large plans are often high-profile targets for people who oppose development, he says. Modesty in scale often gets things done, not least because many reviews have thresholds that intentionally allow small players more leeway. More particularly, the megaprojects of urban renewal, like that of New London, Connecticut, create holdout situations and adverse publicity that more modest and contingent development can more easily avoid.
William Fischel has taught economics at Dartmouth College since 1973. He has written four books, including The Economics of Zoning Laws (1985) and The Homevoter Hypothesis (2001), and more than fifty articles with local government themes. He served on the Hanover, New Hampshire, zoning board for ten years and was a member of the board of the Lincoln Institute of Land Policy for four years.
Zoning Rules! is also available as an ebook at Amazon.