Free Liberal

Coordinating towards higher values

Notes on Zoning

by , Contributing Editor, Free Liberal

Here is a really fascinating piece. The author applies price theory to zoning laws and points out that price gradients are a direct and effective mechanism for coordinating land uses.

The author makes a good argument, and I think there is space for additional conversations; especially regarding tort law, common law, and externality pricing.

But for the most part, I think we can leave these points aside. Instead I’d rather add a couple points and relay an anecdote about where zoning’s larger unintended consequences lay.

Here in Norfolk, South Norfolk, Chesapeake, and Portsmouth—like many older cities—the initial suburban development between 1920s and 1940s sprang up around trolley lines emanating from city centers.

Now as time has passed, a lot of these suburbs are starting to fall apart. The historical and zoning overlays passed in the 1970s have effectively locked in former lower capital intensity uses. For example, entire swaths of grid-zone neighborhoods are frozen in postage-stamp R-4.5 and R-5 zoning, with additional provisions for preserving neighborhood characteristics through historical aesthetic restrictions.

This has led to a huge amount of housing stock that cannot be re-capitalized. Low-end uses such as density apartment development, and higher-end uses like O&I, low density commercial, and row houses, are effectively excluded. Excluding these forces landlords and owners into higher schedules of main.

Some wealthier landowners that can afford historical compliance remain relatively less affected, so the cost of the policies is disproportionately borne by people with fewer economic resources and fewer potential uses for the latent value locked up in the land.

Whatever innovation and redevelopment could happen with looser zoning regulations, even tear-down and knock ups for newer houses, is never able to materialize.

Basically, zoning creates areas of under-utilized and dead capital in a lot of ways, where the convertibility of stock to other uses is either prohibited or too expensive. The interplay between industrial and residential, while relevant, is probably a much smaller overall loss relative to residential to residential.

What we’re missing is that zoning commonly creates market rigidities and keeps neighborhoods populated by obsolete and inefficient housing that cannot be converted to newer, safer housing.

We’re keeping people down by keeping them from picking themselves up.

About

Tom Thrasher, Contributing Editor
Tom Thrasher is an editor and commentator for Free Liberal.