Chapter 9 Land Use Controls and Zoning

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Chapter 9 Land Use Controlsand Zoning
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• Fact
• Most cities in U.S., regardless of size, have
  policies that control land-use
• Questions to Consider for Chapter 9
• Why do cities control land use?
• What are the market effects of land use controls?
• What are the legal foundations of zoning and
  other land-use controls?

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Why is Zoning Legal?!

• 1926 U.S. Department of Commerce developed the
  Standard State Zoning Act
• The act grants power to cities to regulate
  building
• Height, Stories, Size, Building Density, Open
  Space, Location (commercial, industrial,
  residential).
• Health, Safety, Morals, and General WelfareThis
  about covers EVERYTHING.

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Controlling Population Growth

• Urban Growth Boundary
• Urban Service Boundary
• Building Permits

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• Urban Growth Boundary -
• Outlaw development outside urban boundary
• Portland, Oregon
• Urban Service Boundary -
• Development is legal but city doesnt provide
  services
• Boulder, Colorado
• Many practice this, even though its not on the
  books
• Effect of Urban Growth and Service Boundaries
• Reduces demand for residential land outside the
  boundary
• ?Lower price of residential land outside boundary
• Increases demand for residential land inside the
  boundary?
• ? Higher price of residential land outside
  boundary
• Restricts supply of labor
• Fewer jobs
• Firms must pay higher wage rate
• Reduces congestionmaybe

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Precise Growth Controls Land Area City Fixed
and Lot Size Controlled
In a fixed-size city, increasing lot size
requirements or increasing acres per capita
lowers utility of all workers in a region. Start
with 2 cities of 4m, ones pop gets capped at 3m
via land use restrictions. Now, there is a city
of 3m and a city of 5m. Land prices in the
controlled city rises, and utilities between the
two cities equalize againbut now at different
populations.
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Precise Growth Controls Growth Boundary
The big winners are the owners of land inside the
8-mile growth boundary. Their rent received just
increased. The big losers are those land owners
juuuuust outside the boundary. Their land rent
just dropped and flattened out and stays flat
until it gets to land that was previously valued
at Ra, Which is at 12 miles out. After 12 miles,
there is no effect on land rents.
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If lot size is allowed to vary, but boundary
still exists

• This looks pretty much the same as before, only
  now because firms and people can live/operate on
  smaller lots, the efficiency loss is reduced.

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• Building Permits -
• limits population growth by limiting supply of
  new housing
• Effect of limit on building permits
• Reduces supply of new housing ?
• higher price of new houses
• Few new homes built
• Lower price for residential land
• Larger profits for developers getting the permits
• Current allocation of permits
• Fixed price by housing type
• Ways to allocate available permits
• With impact fee or development tax
• Auction permits to highest bidder ?
• Additional revenues for local government
• Rank proposed projects by
• Aesthetics, green space, density , etc.

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Effect of Limiting Building Permits

Supply limited to 80 permits
Initial Supply Curve
Price of Houses (1,000)
250
200
160
Demand
80
120
New Houses per Year
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Land-Use Zoning

• Zoning for Industrial Nuisances
• Retail Zoning
• Residential Nuisances
• Fiscal Zoning
• High Density Zoning
• Design Zoning
• Open-Space Zoning

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Zoning for Industrial Nuisances

• Industrial firms produce negative externalities
• Noise
• Smoke
• Sight pollution
• Limiting industrial firms to industrial parks
  reduces impact of negative externalities on
  residential areas

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Zoning for Retail Nuisances

• Retail firms also produce negative externalities
• Noise
• Traffic congestion
• Air pollution
• Parking problems
• Limiting retail firms to retail centers reduces
  impact of negative externalities such as auto and
  truck traffic on residential areas
• Performance zoning for retail
• Allows retail development in residential areas
  when developers meet standards for traffic flow
  improvement, parking, landscaping, etc

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Zoning for Residential Nuisances

• High density housing also produce negative
  externalities
• Noise
• Traffic congestion
• Parking problems
• Sight pollution such as limiting sunlight and
  restricting views
• Limiting apartments, mobile homes to certain
  areas reduces negative impact on single family
  households
• Performance zoning for high-density residential
  developments
• Allows high density housing in certain areas when
  developer provides
• Off-street parking
• Street Improvements to limit congestion
• Building designs
• aesthetically pleasing
• preserve sunlight, existing sight lines

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Fiscal Zoning

• excluding households or firms that impose fiscal
  burden on local government
• Fiscal burden
• when household or firm consumes more local public
  services than it pays for through local taxes
• Fiscal surplus
• when household or firm pays more in local taxes
  than it consumes in local public services

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High Density Housing

• Households in apartments, duplexes, mobile homes,
  and small houses consume more in local services
  than they pay in local taxes.
• Large-lot zoning
• Establishes minimum lot size for residential
  developments
• Results in a minimum house value public services
  than it pays for through local taxes
• Effect of large-lot zoning for houses, mobile
  homes
• Increases price of low-income housings
• Decreases number of low-income housing units,
  households
• Reduces tax bills of households providing fiscal
  surplus
• Increases demand for low-income housing in other
  areas
• Increases tax bills of households providing
  fiscal surplus in other areas

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Design Zoning

• Where a city planner designs a city, then
  arranges activities to
• promote efficient use of infrastructure
• preserve open space
• Directed development
• Where city directs development to certain areas
  by changing the zoning
• Example
• Want to preserve southern end of Carroll County
  for agricultural use
• Zone southern part of county for agricultural,
  low density residential only
• Effect of directed development
• Increases price of land in area development
  directed toward
• Deceases price of land in area development
  directed away from

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Transferable Development Rights

• Movement today toward establishing preservation
  zones
• where development is limited to preserve land use
  in present state
• Establishment of preservation zone creates
  inequity
• Reduces the market value of land in preservation
  zone
• Landowners inside zone are worse off
• Increases market value of land near preservation
  zone
• Landowners outside zone are better off
• Transferable development rights (TDR) -
• way to compensate landowners who are worse off
• Establish a limit to total development allowed
  inside, outside preservation zone
• Issue development rights to landowners inside,
  outside zone
• Landowners inside preservation zone can sell
  their development rights

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Open-Space Zoning

• Open-space zoning (two methods for providing
  greenspace)
• 1) purchase and preserving land for open space,
  greenbelts, agricultural preserves, nature
  preserves, etc.
• 2) Restrict the use of private land (zoning)
• Winners
• Owners of residential, commercial land nearby
• City dwellers who benefit by walking by or
  driving by
• Losers
• Landowners who are restricted in use of the land
• 1 is the more expensive optionCity acquires
  land at market price
• 2 is cheaper from citys point of viewno
  purchase required

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Open Space Zoning-Inefficient
If the city purchases the land for OS, it
compares the cost and benefits as it does for
trucks, schools, etcat the market value. Partial
compensation results in more than efficient
amounts of OS. When land is zoned to create open
space, the cost is shifted to the land owner.
Because the city and voters doesnt bear the full
cost, it zones more than the efficient amount. If
the city doesnt compensate the owner, the MC is
0so, it zones open space until the marginal
benefit is 0the last acre of OS is worthless.
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Zoning and the Law

• Land use controls in effect today are result of
  60 years of legal decisions based on challenges
  by affected landowners
• Constitutionality of zoning laws is based on
• Substantive due process
• Nuisance zoning is constitutional if it promotes
  public health and safety
• Equal protection
• Fiscal or exclusionary zoning has been challenged
  on basis that it harms low-income residents
  outside the jurisdiction
• Just compensation
• Does zoning violate the taking clause ?
• If government converts land from private to
  public use, the landlord must be compensated
• Courts generally rule that landlord does not have
  to be fully compensated when zoning takes value
  from the land

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Zoning cant be arbitrary

• Euclid v. Ambler (1924) Established the
  standards of substantive due process for zoning
  regs.
• Zoning must be for legitimate public purpose
  using reasonable means
• Ambler Realty bought land for commercial
  development, but the land was zoned
  residentialthey suedthey lostland use and
  separation of uses is reasonable.
• Public benefits criteria does not require
  benefits to EXCEED costs.
• San Franciscos tried to explicitly segregate its
  Chinese populationbut, they were declared
  unconstitutionalThe city then went after
  laundries (a Chinese-dominated industry at the
  time). This did not violate the Constitution,
  because it focused on the separation of business
  and residencesand, thus allowed SF to provide a
  legal means to segregate.

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Interesting Things to Read on Eminent Domain

• Kelo v. City of New London CT (2005)
• Berman v. Parker (1954)