The past and future of zoning
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 this month 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 enabled cities to chart their own course. 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.
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. "The housing subsidy is most likely the major political basis for excessive land use regulation," Fischel says. "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 may cartelize the housing market, and exurban growth could simply be 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
- Abolish rent control, which can reduce the supply of rental housing, driving more people into the owner-occupied sector and fueling more NIMBYism.
- 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 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.
What would Henry George Say?
Edward T. O'Donnell has a Google Alert in place for "Gilded Age," and lately it's been popping up with great regularity, as the term is invoked to describe the 21st century: whirlwind innovations in technology; a huge and growing gap between rich and poor; and deep unrest among the "99 percent" who toil far out of reach of top-tier wealth.
The economist sounding the alarm about extreme inequality today is Thomas Piketty, whose 700-page Capital in the Twenty-First Century became a bestseller. The towering figure of the late 19th century in the original Gilded Age was Henry George, whose Progress and Poverty was equally if not more popular. In the penultimate Lincoln Lecture of the spring series last month, O'Donnell, Associate Professor of History at Holy Cross College in Worcester, Mass., and author of Henry George and the Crisis of Inequality: Progress and Poverty in the Gilded Age posed the question, what would Henry George say today?
George occupies a special place in the history of the Lincoln Institute. John C. Lincoln was an inventor and industrialist based in Cleveland, and co-founded Lincoln Electric at the turn of the century with his brother, instituting progressive employee policies that are studied at Harvard Business School to this day. (The story is chronicled in the book Spark). He also became interested in land policy and the ideas of Henry George, establishing the Lincoln Foundation in 1946; in turn the Lincoln Institute of Land Policy was founded in 1974.
George grew up in Philadelphia, and seemed to be a distracted young man, training as a printer, heading to California to pan for gold, and ultimately returning to journalism. Struck by the contrast of lavish mansions on 5th Avenue and the poor Five Points neighborhood of New York City, and how landowners outside San Francisco were holding onto land in hopes of cashing in as the city expanded, George came up with the idea of a single tax on land.
A select few landowners were benefitting handsomely from owning land, entirely because they owned parcels in good locations. Attempting to translate his ideas into political power, George ran for mayor of New York City in 1886, and finished second behind Hewitt, though in front of a young Teddy Roosevelt. Ultimately he ended up fading from the spotlight and died in 1897.
In addition to the broad point that extreme inequality threatens democracy, the most relevant part of the legacy of Henry George today may be the land value tax, O'Donnell said. Land-based financing tools that promote municipal fiscal health, such as the property tax and value capture - based in the notion that government action creates value for the private sector - are also prominent, especially in Latin America. Leading figures such as Warren Buffett and Joseph Stiglitz have underscored the importance of George's identification of wealth in land.
"In the seventies, Henry George would have gotten half a sentence - now he's getting a paragraph!" O'Donnell said.
In addition to Henry George and the Crisis of Inequality, O'Donnell is author of Ship Ablaze: The Tragedy of the Steamboat General Slocum (Random House, 2003), and co-author of the U.S. history college-level textbook, Visions of America: A History of the United States 2nd edition (Pearson/Prentice Hall, 2012). His scholarly articles have appeared in the Public Historian, Journal of Urban History, and the Journal of the Gilded Age and Progressive Era. O'Donnell has created video courses for the Great Courses Company titled, "Turning Points in American History" and "America in the Gilded Age and Progressive Era." He also writes a blog on American history, www.InThePastLane.com.
The lecture, "Are We Living in a Second Gilded Age?" can be viewed in its entirely in our video library here.
Managing State Trust Lands, Updated
A comprehensive report on the management of state trust lands in the West has been updated to reflect the latest policy innovations and best practices. State Trust Lands in the West: Fiduciary Duty in a Changing Landscape (Updated), co-authored by Peter Culp, Andy Laurenzi, Cynthia Tuell, and Alison Berry, is the product of Western Lands and Communities, a joint program of the Lincoln Institute of Land Policy and the Sonoran Institute.
The report, an updated version of the original 2006 publication, State Trust Lands in the West: Fiduciary Duty in a Changing Landscape, was presented at the Western States Land Commissioners Association's summer conference held July 19-23 in Moab, Utah. The updated edition including new graphics, charts, and appendices, reflects the current status of initiatives profiled in the case studies, to better help trust land managers identify successful land management actions.
Available in print and by free download, State Trust Lands in the West (Updated) introduces readers to the concept of state trust lands, which Congress granted to each state upon inception for the purpose of supporting public institutions, primarily K-12 public schools. The report explores the history and current status of trust lands in the West, where 85 percent of the remaining 46 million acres of these lands are concentrated; and offers examples of initiatives to help land managers and other interested parties fulfill their multiple trust responsibilities while producing larger, more reliable revenues for trust beneficiaries, accommodating public interests and concerns, and enhancing the overall decision-making environment for trust management.
State Trust Lands in the West and a companion website, www.statetrustlands.org, show how the states compare to one another: how much land each state holds in trust; the type of revenue generating activities conducted on trust lands; who the beneficiaries are; and the annual revenue generated and distributed to the beneficiaries. Across the West, communities are changing rapidly as a result of both population growth and an ongoing nationwide shift toward a more diversified, knowledge-based economy. This report presents strategies and approaches state trust land managers have taken in response to the changes:
- Establish comprehensive asset management frameworks that balance short-term revenue generation with long-term value maintenance and enhancement
- Incorporate collaborative planning approaches with external stakeholders to achieve better trust land management
- Encourage real estate development activities that employ sustainable land disposition tools and large-scale planning processes, especially in fast-growing areas
- Support conservation projects that enhance revenue potential, offer ecosystem services, and allow multiple uses of trust lands
- Introduce comprehensive reforms to expand the flexibility and accountability of trust land management systems
Earlier this year the Lincoln Institute published a related report, Conserving State Trust Lands, by Susan Culp and Joe Marlow, examining strategies to conserve state trust lands with ecological and environmental value, while maintaining the trust obligation to earn revenue for K-12 schools and other beneficiaries.
Odds & Ends
At the European launch of Planning for States and Nation States in Prague, contemplating complexity ... How land values have grown over 40 years, using our database Land and Property Values in the U.S. ... Protecting a Share of the Housing Market: Message from the President in the current issue of Land Lines ... American cities would benefit from more density ... What Greece can learn from Detroit ... In confirmation of Fair Housing, why a zip code shouldn't determine a child's future - quoting Lincoln Institute board member Raphael Bostic ... This month's highlighted Working Paper: The Land Value Gradient in a (Nearly) Collapsed Urban Real Estate Market, by Timothy R. Hodge, Gary Sands, and Mark Skidmore.
— ANTHONY FLINT, Lincoln Institute of Land Policy