Using and Abusing America's Zoning Laws

For years, Caroline, NY had no zoning codes. This was unusual in the 21st century. Ever since the 1926 Standard State Zoning Enabling Act, almost every town and municipality seems to have decided that zoning codes are essential for protecting civic life. But things seemed to be fine, until some residents decided they were not. Writing for Reason in “A Town Without Zoning Fights To Stay Free,” Christian Britschgi discussed the unusual case. 

As Britschgi puts it, “Almost every other community in the country has a zoning code that assigns each property in town to a zoning district and then lays out a long list of rules describing the kinds of buildings and activities allowed (or not allowed) there.” And why is such a code so ubiquitous? Because “Proponents see zoning as an uncontroversial means of keeping glue factories away from homes, keeping strip clubs away from schools, and generally protecting those things everyone likes.”

But Caroline’s anti-zoning residents are arguing for “a critical rethink of just how useful or necessary this mess of red tape and regulation really is.” As Britschgi describes it, the fight grew out of an attempt by some in town to create a zoning code so they could “say no” to a proposed Dollar General store. Then it blew up because “pro-zoning residents (who lived in Caroline but did not have to earn a living there)…had a very specific vision of what the town should look like, and that vision often clashed with what people were doing, or might one day do, with their property.” Opponents felt the zoning proposal imposed serious “threats to their plans and freedoms,” captured in the slogan, “Zoning kills dreams.” And given that zoning laws are not only ubiquitous, but also highly prescriptive of what citizens are allowed to do with their own property, there is an obvious nexus between such laws and Americans’ liberties. 

What makes this nexus so important is the massive amount of arbitrary power local governments were given by the enabling legislation. The 1926 Zoning Act said that “For the purpose of promoting health, safety, morals, or the general welfare of the community,” cities were “empowered to regulate and restrict the height, number of stories, and size of buildings and other structures, the percentage of the lot that may be occupied, the size of yards, courts, and other open spaces, the density of population, and the location and use of buildings, structures, and land for trade, industry, residence, or other purposes.” 

Given that claims to improve “health, safety, morals, or the general welfare” can be created to justify imposing virtually any local government property restriction that would attract appreciable political support (remember how the General Welfare clause in the Constitution was quickly co-opted by proponents of centralized government), such zoning powers provided vast and largely unaccountable power to local governments. It also provided an excuse for abuse, because it created an opening for governments to take much of the value of citizens’ property through zoning regulations, without having to pay compensation that would otherwise be expected, as long as they could rationalize their actions as “solving” some aspect of a broadly conceived general welfare.

When considering how necessary zoning is, we must weigh the costs (which almost anyone who has had trouble with zoning boards or bureaucracies can rant at length about) against the benefits. A law can advance our general welfare only if its benefits outweigh its costs. And careful consideration of the alleged benefits of zoning reveals that many of the harms supposedly addressed by zoning can be addressed in other ways. Almost all of the purported benefits come down to avoiding chaos and widespread incompatible land uses that would allegedly occur in the absence of zoning. As Dave Cole argued, “property rights and property values are in danger without zoning.” 

If this is the justification, we should ask what we don’t actually need zoning to solve, then ask how much zoning power remains justified once we have winnowed the field of misleading scare stories. It turns out that individuals have many reasons to avoid conflict voluntarily.  

Sometimes there are mutual negative effects, meaning both parties have reasons to avoid an association that would be harmful to them. Positive effects on neighboring properties would lead to voluntary co-location. There are cases in which there are both external benefits (which economists call economies of agglomeration) and costs (e.g., congestion) for those involved, but the benefits are greater, so net gains guide people towards the most valuable land uses.

Many zoning scare stories treat negative external effects as if they are equally onerous to everyone. But people’s circumstances and preferences differ. A property use that may create large negative externalities for some (e.g., noise and smells from a local garage) may well impose smaller negative or even net positive externalities for others (e.g., those less sensitive to the nuisances or more likely to benefit from the conveniences). Such differences allow people to mitigate or even solve externality problems by voting with their feet, moving to locations amenable to their tastes and circumstances. 

Further, land prices and infrastructure can effectively “zone” away many of the scare stories told to justify zoning. For instance, I have heard many times about the “need” for zoning to keep glue factories out of high-end neighborhoods. In reality, land prices are so high in such areas that glue factories wouldn’t choose to locate there. It would be unprofitable to do so. The transportation grid can provide similar protection. For instance, I don’t need to worry about a gas station located on residential streets or my cul-de-sac, because they need roads that facilitate far larger volumes of traffic than such roads can handle. The same is often true for power, water, and sewer systems, because what is required for manufacturing is beyond their capacity in residential neighborhoods, and the available parking is too limited to support office and retail uses.

Such cases substantially winnow down the list of scare stories that could plausibly justify zoning. But even in such cases where voluntary arrangements may not completely solve such issues, city planning need not always be accomplished through the hard coercion of zoning. For example, cities can impose general land use restrictions, rather than different restrictions for different zones, to address widespread conflict or public health. 

Zoning has become almost universally accepted as a justified application of local government power. But carefully considered, the case for zoning is far weaker, and the case against zoning far stronger, than most realize.

Private property rights and non-zoning government alternatives can also achieve some of the goals of zoning laws, often more efficiently. Nuisance law can handle physical invasions of property (noise, smells, dust, vibration, etc.) without requiring zoning, by focusing on the harms directly. Performance standards for mitigating impacts on neighbors (e.g., adding road capacity or turn lanes to mitigate congestion) can be far less costly than requiring separation of different land uses.

Private communities have also proven capable of effectively internalizing externalities, providing more stable expectations through voluntary arrangements. They are designed to avoid many negative effects. These are often superior to zoning in preventing arbitrary changes after the fact, because of the need for residents to approve changes. They can often provide a superior mechanism for changing land uses when appropriate, by preventing the sale of one property for a use that would harm other residents in the community, while allowing all affected residents to jointly sell for a higher valued land use. Restrictive covenants have also provided successful alternatives to zoning, as in Houston.

There is also the further question of how well zoning actually works to provide the benefits attributed to it.

Friedrich Hayek long ago demonstrated that central planners cannot efficiently do what they set out to do. Central planning loses valuable information known only to particular individuals–details critical to market values, but unknown and unknowable to planners–and with it, the wealth creation such knowledge makes possible. And zoning is a particularly difficult form of central planning, because what is being planned involves massive amounts of detailed and often rapidly changing knowledge, not only about what is to be done, but also about the many aspects of “what goes where and why.”

Marketplace zoning, which could be described as “letting the markets sort things out organically,” is often more effective than government zoning. Shopping malls are a good example of this. The potential for profits and losses provides better incentives than in non-profit planning such as zoning. Further, private sector bankruptcy provides a mechanism for eliminating mistakes, while no similar mechanism exists to undo zoning mistakes and turn choices over to those who can make them more effectively.

Advocates of zoning claim that it provides stability of expectations, by reducing uncertainty that would otherwise exist. But this is also questionable. In one sense, it imposes too much stability, because urban land uses evolve with time, technology, and so forth.  Zoning often gets in the way of effective responses, for instance by locking in previous land uses when they are no longer the most valuable. In another sense, though, it provides too little stability of expectations. The many exemptions sought and often granted from zoning rules (especially for political favorites and projects) provide good illustrations. If planners knew enough to zone wisely, it shouldn’t be necessary either to re-zone properties or to grant widespread exemptions from them. But the prevalence of such ex-post changes demonstrates how zoning often creates more complexity and high-stakes uncertainty, rather than stability.  

We must also remember that zoning has often been a source of abuses, ranging from San Francisco’s ill-treatment of Chinese people and laundries to segregation of blacks to massive wealth redistribution, from the politically unfavored to the politically favored. 

Zoning has become almost universally accepted as a justified application of local government power. But carefully considered, the case for zoning is far weaker, and the case against zoning far stronger, than most realize. It grants local governments incredibly broad powers, which extend beyond what seems necessary for most of the problems and issues that normal cities and municipalities face. 

How does this analysis connect back to Caroline, New York? As Britschgi described the views of John Morse, one of the town’s anti-zoners, “the freedom to do what he wants on his own land is what makes Caroline special.” Morse helped others see that under zoning “their own plans for their land would be banned or subject to a lot more rules going forward.” Yet, as we have seen, zoning is unnecessary to solve a great many of the problems used to “prove” its necessity. What does that say about whether zoning’s benefits outweigh the costs? As Nolan Gray, author of Arbitrary Lines, put it, “Freedom to do what he wants on his property is a valuable asset all on its own, and that freedom can’t coexist with zoning.”