Zoning Rules! Except When It Doesn’t
EspañolName one relatively minor policy change that would lead to a 9.5 percent increase in GDP for the entire nation. If you said fixing zoning and land-use policies, you would be right. Well, at least according to a new paper by Chang-Tai Hsieh and Enrico Moretti.
According to their study, that much growth could be created by bringing land-use laws in San Francisco, San Jose, and New York, down to that of the average US city. Cato Institute scholar Brink Lindsey, in his just-released white paper, argues land-use policy reform is one of a few public-policy issues where scholars broadly agree that reform would yield notable amounts of growth.
And now even one of the most articulate defenders of zoning laws, Professor William Fischel from Dartmouth University, has joined the chorus, at least somewhat.
Fischel’s forthcoming book, Zoning Rules! The Economics of Land Use Regulation, is one of the most important pieces of scholarship in years related to how government regulates land. The author is one of the most accomplished economists to study this important field, and gives insights that few others can.
Fischel is unique in that not only has he spent decades studying and teaching zoning and related rules as an academic, but he sat on a zoning board in a fairly typical US town for a decade. This scholar-practitioner experience makes him particularly in tune with why citizens love zoning laws so passionately.
Those who doubt this statement should note that when some state courts struck down zoning schemes, such as in New Jersey, voters overwhelmingly moved to change the constitution to allow them. From the first comprehensive zoning laws to near universal adoption took little more than a decade.
So, we have a paradox: regulation is clearly excessive, yet zoning is one of the most popular public policies. How can that be?
To address this, the book dives wholeheartedly into the history of zoning, from the first laws to today. Fischel examines the cases that set the legal jurisprudence for policies we have today, going so far as to include maps of the cites in the famed Euclid v Ambler and Nectow v Cambridge court cases.
He persuasively argues that zoning originated as a “bottom-up” institution, supported by city residents who sought to prevent industry and commerce in residential neighborhoods. This “good housekeeping” approach seeks to minimize nuisance complaints by segregating uses for property. This “golden era” of basic use-segregating zoning seemed to work to fulfill real, popular desires among voters, but did not seek to stifle growth for its own sake.
Yet things changed in the 1970s, which saw a number of forces converge to doom the “good housekeeping” model of zoning. First, the rise of federal environmental review gave anti-growth activists a new tool to threaten development projects.
The high inflation of the period spurred ever-more sensitivity to the value of one’s home, giving rise to so-called homevoters, who sought to stymie development. These homevoters have every incentive to be active in local government, unlike renters, who have little incentive to fight for new projects which may or may not ever affect the rent they pay.
In the United States, local government is dominated by homeowner interests; one simply needs to sit through a single local zoning meeting to understand the passion these voters have. When their money is directly on the line, people will show up to defend their interests. While Fischel speaks out in support of “good-housekeeping” zoning, he clearly thinks that political dynamics have broken a once-useful tool for sound regulation, locking many people out of cities who would like to live there.
This makes land-use regulation special. Good policy should strive to be “place neutral.” That is, local governments should not seek to enrich current residents at the cost of prospective residents. Yet, the political power of homevoters is near impossible to break. Fischel offers up a few remedies to stem the anti-density tide, which would help to varying degrees.
He argues that the most important part of this is making home ownership a “less important part of the voters’ financial portfolios,” and to stop providing tools for third parties to intervene in local zoning decisions. Of the proposals he offers, the best simple solution is the repeal of the home-mortgage interest tax deduction. This would help to correct for the political economy problems of land use, even if it is technically bad tax policy.
Many free-market proponents rail reflexively against zoning, out of distaste for partial community control of one’s property. I’m certainly one of them. Fischel admits that zoning does precisely that on page 138 of the book: “[The national standard zoning law] delegates to the municipality the power to control virtually every aspect of private development … [the long list of property characteristics] are, without reservation, all subject to community control.”
Fischel’s makes clear that, contrary to popular belief and basic logic, zoning laws are a bottom-up institution, coming from the desires of average voters. They address common fears of polluting industry and loud commerce in residential areas. Yet, with the rise of the homevoter, they have clearly gone too far, at least in major cities.
As the aforementioned Lindsey study makes clear, the policy consensus has turned against zoning laws. Reform is not only necessary, but imperative. When one of the nation’s great proponents of zoning argues for reform, the time to change policy has clearly come.
Fischel’s book is the magnum opus of a life studying zoning laws, and is required reading for anyone who seeks to reform the way our nation regulates private property.