Ludwig von Mises Institute

Zoning

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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.[1]

Analysis[edit]

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.[2]

Criticisms[edit]

Violation of property rights[edit]

Zoning laws are a violation of property rights. They involve forcibly imposing a restriction on legitimate private-property use through legislative fiat. A person, who has acquired property through homesteading or through voluntary trade with another person who legitimately owned the property, should rightly be able to use his property in any way that does not intrude upon the property rights of others.[3]

Corruption[edit]

Controversy over zoning laws is aggravated by the fact that coercive zoning laws must inevitably involve arbitrary bureaucratic discretion. Changes in communities — such as growth in population, changing demography, or growing or diminishing affluence — can give rise to new demands for certain kinds of property and property uses, and the restrictions on property development and use must therefore be adapted to suit changing demands.

Because zoning problems involve continually changing local conditions, bureaucrats and politicians are inevitably vested with substantial discretionary power in the creation and enforcement of restrictions. As with other forms of political power vested in the government, this discretionary power is inevitably exercised in favor of those groups who support the power of the decision makers. Since such laws invest discretionary control over property development and use in "governmental representatives," these laws allow political parties and other political interest groups to extort funding from wealthy developers — funding that is usually forthcoming.

In addition to being inherently corrupt, this practice of extorting money from property developers often leads to a quid pro quo in which governments use coercion to assist wealthy developers in acquiring land and trampling on the legitimate property rights of others (through eminent domain laws or other coercive means). One commonly hears the complaint that local governments are in the pockets of developers, but it is rarely appreciated that this is an inevitable consequence of the government's attempts to extort support from developers through coercive zoning laws. This is just one manifestation of the inevitable regulatory and political capture that occurs when governments attempt to control private business.[3]

High prices[edit]

Several studies suggest that zoning, and other land use controls are at least in part responsible for high housing prices.[4][5][6][7]

Effects on communities and businesses[edit]

Other studies have argued that by reducing opportunities for affordable housing, households of modest means are excluded, resulting in increased racial segregation.[8]

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.[9]

Emergency situations[edit]

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.[10]

Voluntary zoning[edit]

Property owners within a given neighborhood can contractually agree to impose restrictions on themselves.

In some cases, restrictive covenants may mimic the kinds of restrictions present in zoning laws and may therefore be used as a means of voluntary zoning. Property owners may agree to limit developments on their land to a certain height as in existing zoning laws; they may agree to paint their properties in a similar color scheme, as with some housing complexes; or they may agree to restrict the use of their property to particular uses, such as residential use.

It is no mystery why property owners would restrict their own property rights. For example, they might enter into restrictive covenants in order to secure similar restrictions on their neighbors. A property owner would also have regard not only to his own desired usage of his property, but also to the likely desires of prospective purchasers and the resultant effect on the market value of his property.

Instead of relying on quid pro quo restrictions, a system of voluntary zoning would also allow people to purchase restrictive covenants from a willing party. For example, a man with a strong aversion to dogs in his neighborhood could seek to purchase a restrictive covenant preventing dogs from living on his neighbors' properties even if he does not desire any particular restrictive covenant being imposed on his own property (obviously he will not allow dogs there himself, but he does not need a restrictive covenant to do this).

Voluntary zoning through private restrictive covenants already exists in areas where government has not imposed zoning laws. Such covenants have shown themselves to be perfectly adequate to protect property owners against adverse development by others. Voluntary agreements for restrictions on the use of property also exist in apartment and townhouse developments where property owners govern common areas under a corporate arrangement. These arrangements exist even in areas in which there are existing government zoning laws, though they are often crowded out by these laws. Some complexes have restrictions on use (such as rules against pets), some complexes have restrictions on development or alterations, and some have rules requiring a certain uniform color scheme or aesthetic design for all properties.

While some may prefer not to live in complexes such as this, where they are restricted by their neighbors in the use of their property, there can be no moral objection to this from a libertarian perspective so long as these arrangements are undertaken with the consent of property owners. Of course, in many cases, property owners will buy into a scheme with existing restrictions, but in this case the property title purchased is already restricted, and the restrictions therefore become a condition of their purchase.[3]

References[edit]

  1. "Zoning", Dictionary.com, referenced 2012-12-04.
  2. Hans Hermann Hoppe and Walter Block. "On Property and Exploitation" (pdf), International Journal of Value-Based Management, 2002. Referenced 2012-12-04.
  3. 3.0 3.1 3.2 Ben O'Neill. "How Zoning Rules Would Work in a Free Society", Mises Daily. Referenced 2012-12-05.
  4. Edward L. Glaeser, Joseph Gyourko. "The Impact of Zoning on Housing Affordability" (pdf, abstract), National Bureau of Economic Research, March 2002. Referenced 2012-12-04.
  5. Edward L. Glaeser, Joseph Gyourko and Raven E. Saks. "Why Have Housing Prices Gone Up?" (pdf), Harvard Institute of Economic Research, Discussion Paper Number 2061, February 2005. Referenced 2012-12-04.
  6. Fischel, W. A. 1985. "The economics of zoning laws: A property rights approach to American land use controls." Baltimore: Johns Hopkins Univ. Press. See preview. Referenced 2012-12-04.
  7. Jonathan T Rothwell. "The Effects of Density Regulation on Metropolitan Housing Markets" (abstract, [pdf), June 4, 2009. Referenced 2012-12-04.
  8. Jonathan Rothwell, Douglas S. Massey. "The Effect of Density Zoning on Racial Segregation in U.S. Urban Areas" (pdf), Princeton University, New Jersey, July 2009. Referenced 2012-12-04.
  9. Troy Camplin. "Zoning Laws Destroy Communities", Mises Daily, April 30, 2010. Referenced 2012-12-04.
  10. Marc Scribner. "Hurricane Katrina, Houston And The Humanitarian Case Against Zoning", Forbes, 08.31.10. Referenced 2012-12-04.

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