City unplanning.

AuthorSchleicher, David
PositionPolitical costs of downzonings on housing development - Introduction through II. Land-Use Law and the Political Economy of City Planning A. The Role of Procedure in the Absence of Local Party Politics, p. 1670-1704

ARTICLE CONTENTS INTRODUCTION I. THE LAW AND ECONOMICS OF CITY PLANNING: A REVIEW A. Economic Theory and Zoning B. Changes in Zoning Regimes over Time II. LAND-USE LAW AND THE POLITICAL ECONOMY OF CITY PLANNING A. The Role of Procedure in the Absence of Local Party Politics B. How Land-Use Procedure Produces Strict Land-Use Policy III. LAND-USE LAW AND THE POLITICAL ECONOMY OF CITY UN PLANNING A. Using Land-Use Law To Change the Shape of Interest Group Competition: Balancing the "Zoning Budget" B. Using Land-Use Law To Bring Consumer Interests to the Table: Standing on TILTs C. Using Land-Use Law To Insure Against Developers' Broken Promises: Political "Safeguards" CONCLUSION INTRODUCTION

There is something stale about most public debates about land use. Year after year, we see the same rhetoric coming from the same players. Developers of skyscrapers promise jobs and growth when they debate plucky community groups worried about gentrification or access to sunlight. Environmental groups denounce minimum lot requirements for generating sprawl, while suburban homeowners claim these rules help preserve the character of their communities. And so on. The frequent use of shorthand and acronyms--NIMBY, LULU, BANANA, etc. (1)--reminds all involved that this year's controversy is not much different from last year's. While there have been new movements among city planners, like "New Urbanism," (2) and some new tools for getting political approval of new projects, like community benefits agreements (CBAs), (3) the rhetoric in today's debates about zoning differs little from the rhetoric in similar fights decades earlier.

Law and economics scholarship about the efficiency of zoning has been quite consistent as well, the basic shape of the debate having taken its modern form around thirty years ago. Supporters of a community property-rights theory of zoning, like Robert Nelson and William Fischel, argue that zoning regimes give local governments the right to prevent new development but allow landowners to negotiate for permission to build. This is efficient, as it reduces the transaction costs for negotiations between builders and incumbent residents over the effect new projects have on property values in a jurisdiction. As long as transaction costs are low, assigning the right to permit development to the local government instead of giving landowners the ability to build as of right should not matter. (4) On the other hand, the classic critique of zoning, by Robert Ellickson and Bernard Siegan among others, maintains that zoning restricts the supply of housing and office space, artificially pushing property prices upward and separating land uses. Further, zoning regimes do not do much better in practice than the market, courts, or private contracts at minimizing nuisances. (5) While there has been much excellent work in the field, the terms of the debate have not shifted substantially in some time.

One might take from this that little about zoning has changed in the last few decades, either on the ground or intellectually. This would be wrong on both counts. The major intellectual development has been the rise of agglomeration economics, most notably the work of Paul Krugman, Robert Lucas, and Edward Glaeser. Their work explores exactly what benefits individuals and businesses get from colocating, or existing in close physical proximity to others. (6) This research, largely unincorporated into legal scholarship until quite recently, has shown that urban density provides individuals with reduced shipping costs, the benefits of market depth, and information spillovers. Further, certain agglomerative factors--particularly information spillovers between highly educated residents--have become increasingly important in the modern economy. As zoning regimes reduce density and separate individuals and businesses that would like to be near one another, the increasing empirical validation of the importance of agglomeration economies has helped explain how strict zoning regimes harm the efficiency of property markets and regional economies.

While economic thought has moved substantially against increased stringency in zoning (and intellectual movements inside city planning have pushed for increased density and mixed-use development), practice has moved in the other direction. Zoning policy has become much stricter over the last thirty or so years, and it has done so in ways not predicted by those who study the political economy of urban development. During the formative debates about the law and economics of zoning in the 1970s, there were only three metropolitan areas in the United States in which land-use policy had a significant effect on housing prices region-wide, as judged by the existence of a gap between the cost of housing and the combined cost of empty land and construction. (7) (Absent supply restrictions, they should be roughly equal.) Now, such gaps have emerged in many metropolitan areas on both coasts of the United States and a number of inland regions as well. (8) And where such gaps have emerged, they have grown substantially. In the most regulated regions, legal restrictions on the supply of housing are likely responsible for as much as half of the cost of any given housing unit. (9)

These changes in the strictness of land-use policy have helped to cause massive shifts in population across the country. Rich, restrictive regions like San Francisco and Boston have seen large increases in housing prices but only small increases (or decreases) in population. At the same time, there were huge population inflows into less productive but unrestrictive regions like Houston and Atlanta but only small increases in housing prices. (10) Even in the most successful parts of the country during their most successful periods, zoning rules limited entry: Silicon Valley lost population in the late 1990s, and lost domestic population from 2000 to 2010, as housing prices increased faster than wages. (11) Strict zoning rules in productive regions not only cause static efficiency losses but can also reduce economic growth. Artificially high housing prices limit employment in the fast-growing industries that are prevalent in what Paul Krugman calls the "Zoned Zone" of the country, and they reduce the number of people who can capture the human-capital-enhancing information spillovers available in these areas. (12)

Not only has the amount of restriction changed, but the kinds of local governments engaged in restricting development have changed as well. Scholarship on the political economy of land use--using methodologies ranging from public choice to regime theory--has tried to explain a world in which tony suburbs run by effective homeowner lobbies use zoning to keep out development, but big cities allow relatively untrammeled growth because of the political influence of developers. But the world has changed. Over the past few decades, as demand to live in them has increased, big cities have become responsible for substantial limits on development, particularly in desirable neighborhoods. Fixing supply in the face of heavy demand, unsurprisingly, has led to skyrocketing prices. Although developers are the major players in city politics, we have not seen enough growth in the housing supply in many cities to keep prices in line with construction costs.

We need a new story about the political economy of land use in big cities. Further, for those who believe that the zoning regimes are too strict, there is a need for new ideas for reform rooted in a realistic view of how land-use politics actually work. That is what this Article aims to provide.

Part I will review the law and economics literature on zoning and will make the case that, although an exacting cost-benefit analysis has proven difficult, there is a growing consensus that the harsher restrictions of the last twenty years have come at a substantial cost to the affordability of housing and the vibrancy of local and regional economies (and even the national economy). It will also show that the increased restrictiveness of big-city governments is inconsistent with the predictions of the existing literature on the political economy of zoning.

Part II will sketch out a story about the political economy of zoning in big cities, one that places the legal regime governing land-use decisions at the center. Previous scholarship has looked at the spending power of relevant interest groups and argued that, although consumers of housing individually suffer harms that are too small to provide sufficient incentives to get involved in land-use disputes, the supply of housing should not be substantially constrained in cities due to the influence of developers. (13) In smaller towns, opposition from homeowners near proposed new developments (or "neighbors" in an evocative, commonly used term in the literature) may rule the day, but most scholars assume that developers use their lobbying muscle to dominate the political process in big cities and make development relatively easy.

However, the fights between developers and neighbors do not exist in the aggregate. As such, it is important to understand the context in which such disputes take place. Importantly, most cities do not have competitive party politics--they either have formally nonpartisan elections or are entirely dominated by one party that rarely takes stances on local issues. (14) Absent partisan competition, there is little debate over citywide issues in local legislative races, and there is no party leadership to organize the legislature, making the procedural rules governing the order in which the legislature considers land-use issues far more important. (15) The content of land-use procedure can generate "localist" policymaking: seriatim decisions about individual developments or rezonings in which the preferences of the most affected local residents are privileged above more weakly held citywide preferences about...

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