100 Years of Zoning

by Levi Russell

In the past I've discussed zoning laws, referencing articles that compare present vs past policies and that explain the unusual case of Houston, TX. More recently I read an article on Bloomberg with a provocative title: "Zoning has had a Good 100 Years, and That's Plenty." The author's main point is that the costs of zoning laws (primarily their negative effects on the poor) outweigh the benefits. Below are some passages I particularly liked.

Over the past few years, zoning has been blamed, mainly by economists bearing substantial empirical evidence, for an ever-growing litany of ills. The charge that zoning is used to keep poor people and minorities out of wealthy suburbs has been around for decades. But recent research has also blamed it for increasing income segregation, reducing economic mobility and depressing economic growth nationwide.

One can never be certain about these things, but it’s quite possible that excessive land-use restrictions are among the major causes of our long national economic malaise.  Jason Furman, chairman of the White House’s Council of Economic Advisers, made this very point in a speech in November. Yet the platform adopted at the Democratic National Convention this week made no mention of either “land use” or “zoning,” while the Republican platform mentioned them only to condemn the current administration’s purported efforts “to undermine zoning laws in order to socially engineer every community in the country.”

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Dartmouth College economist William Fischel, whose excellent book “Zoning Rules!” has been my most important source on this topic, favors a different explanation. In the decades before the automobile, industrial and residential development was to a large extent constrained by the location of rail and streetcar lines. After trucks and buses became common, though, industrial businesses could locate far from railways (and wharves) and apartment developers could build far from streetcar lines. Anxious homeowners -- and in some cases, merchants -- clamored for rules to keep people from building factories next door.

This does seem to have been one of the motivating factors in New York. According to David W. Dunlap’s New York Times column Monday on the zoning anniversary, “the merchants of Fifth Avenue were losing their retail customers and watching the value of their properties drain away, as big loft buildings for garment manufacturers muscled in around them.” Still, as America’s least auto-centric city, New York also focused its zoning rules on concerns -- skyscraper design, for example -- that were less of an issue elsewhere in the country. It was to be another zoning ordinance adopted six years later in Euclid, Ohio, that ended up fully establishing zoning as a national institution. 

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Sutherland [a Supreme Court Justice in the 1920s and 1930s - LR] affirmed that cities had every right to zone land without compensating landowners or businesses that were harmed. He also said -- unprompted by the facts of the case -- some strangely nasty things about apartment buildings. A sample:

Very often the apartment house is a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by the residential character of the district.

I find it really hard to read that as anything but an affluent guy justifying the legal exclusion of less-affluent people from his neighborhood. There’s been an element of class discrimination to zoning from the early days -- sometimes mixed in with racial discrimination. Still, there have always been other, more-positive aspects, too. In Fischel’s words, “zoning probably makes for more efficient provision of local services and better neighborhoods than would be available without it.”

After about 1970, though, zoning’s negative economic effects began to grow. Before then, housing prices were more or less the same across the country. Since then, prices in the metropolitan areas of the Northeast and West Coast have risen much faster than in most of the rest of the nation -- in the process increasing inequality, thwarting residential mobility and slowing economic growth. Ever-tougher zoning rules and restrictions on growth appear to be a major cause. Fischel has a long list of explanations for this intensification of zoning that I won’t go into here, other than to mention the one that drives me the craziest -- the dressing-up of self-interested economic arguments in the language of environmentalism and morality.