Zoning

Zoning (especially in city planning) is the division of an area into zones, to restrict the number and types of buildings and their uses, also known as zoning laws.

Analysis

People like to maintain and not upgrade the value of their real estate holdings. One way to do this is through entrepreneurial action (including insurance). A person can purchase a home in a large scale condominium development, for instance, where all owners are precluded from activities (painting a house with polka dots, ripping it down and putting in a cement factory) which might conceivably lower property values. Alternatively, a restrictive covenant can be signed with neighbors to the same end.

But this costs money, time and effort. There are ‘transaction’ costs involved. Frequently it is much easier to rely on the political process. If a law is passed requiring a minimum one acre lot size for single family dwellings, hordes of ‘undesirables’ can be kept out. For the only chance of the poor successfully bidding against wealthy people is in the form of multiple dwelling units. They can ‘gang up’ on the rich by more intensive land settlement. But if this is precluded by zoning laws, that option is not available to them. Better yet, inaugurate the no growth philosophy, ostensibly for environmental ends; this obstructs any new building, for whatever purpose, the better to maintain property values. Why rely on an ‘imperfect’ market when legislative enactments can attain such ends?

City planners (who owe employment to the existence of zoning laws) argue that this system keeps ‘incompatible’ land uses separated from one another. But private property rights can achieve the same ends, without the use of force and compulsion. The reason filling stations do not locate in cul-de-sacs is that there is too little traffic to support them there. Likewise, cement factories are prohibited by marketplace considerations from setting up shop in downtown areas. High real estate prices relegate them to the periphery. When land use bureaucrats err, they do so on a colossal, city-wide scale. They lose millions for the citizenry but not a penny of their own personal funds. The benefits of marketplace zoning, as is illustrated most drastically by the failure of the Soviet economic system, is that private investors, who risk their own money, tend to be more careful with it. The drawbacks of central planning apply to cities as well as to countries.

Criticisms

High prices

Several studies suggest that zoning, and other land use controls are at least in part responsible for high housing prices.

Effects on communities and businesses

Other studies have argued that by reducing opportunities for affordable housing, households of modest means are excluded, resulting in increased racial segregation.

Zoning laws force people to have their business only in certain locations. This drives up the price of property for businesses, making it harder to start a new business. The result is that big business is favored over upstarts. Walmart and Home Depot can afford to buy as much commercial land as they need to build a store. And they don't have to worry about a bunch of people selling similar items locally. This makes it even more difficult for the poor to get out of their poverty.

Emergency situations

Marc Scribner argued that zoning laws have also impact in emergency situations. In the aftermath of the 2005 Hurricane Katrina, much of New Orleans and many coastal communities in Louisiana and Mississippi remained under water for weeks. Approximately 240,000 evacuees fled to the nearest largely unscathed major city: Houston. Houston lacked many of the zoning and land-use regulations common in most other urban areas. This peculiarity greatly assisted Houston's ability to absorb the thousands of Gulf Coast evacuees.

Thanks to the city's liberal land-use policies, Houston enjoyed lower real estate prices, increased availability of affordable housing, lower population concentration and more opportunities for entrepreneurs.

Zoning laws had put up artificial roadblocks to the construction of affordable rental units during the preceding decades in communities along the Gulf Coast. This made homelessness even worse for low- to moderate-income residents after Katrina and Rita made landfall. Houston's liberal land-use regulations and thus its enhanced ability to absorb new residents helped mitigate many of the problems often associated with a massive influx of refugees.

In Louisiana and Mississippi, emergency temporary housing was zoned out of many of the worst-hit areas, even as local politicians accused the Federal Emergency Management Agency (FEMA) of mismanagement. Local officials refused to ease existing restrictions and ratcheted up land-use and building regulations. Supporters of these stronger measures claimed that they would help prevent the same level of destruction in the future, but the short-term consequences were dire for those hardest hit.

Links

• Zoning and the Free Market (audio) by Walter Block, October 2011

• Houston and Deregulation (pdf) by Daniel Jacobson, December 2008
• Zoning at Wikipedia