In Print: Zoning Rules! The Economics of Land Use Regulation

Be forewarned: this book’s emphatic title—Zoning Rules!—tells readers that, in the author’s view, local land use regulation shapes the form of American communities, for better or worse. To solve the problems of sprawl and economic segregation that plague cities and urban development, he insists that we must radically reform zoning.

William A. Fischel, an economics professor at Dartmouth College, explains the dominance of zoning laws as a bottom-up institution. As homeowners have seen their housing investments increase, they have increasingly demanded protection from any zoning changes that might decrease their housing values. In his coinage, they have become homevoters, telling their elected officials to leave their neighborhoods alone or be voted out of office. The result is rampant growth control to slow or stop development by curbing rezoning.

Fischel’s alternative is to dampen demand for growth control by changing federal income tax rules that subsidize housing relative to other investments. He would make homeownership a less important part of voters’ financial portfolios. In his words, “Reducing excessive investment in owner-occupied housing is likely to be the most effective means of tempering the anti-growth syndrome that has caused excessive sprawl and promoted a lopsided distribution of income and wealth within and among America’s metropolitan areas.”

Thus, the author’s number-one reform proposal is to limit the federal income tax deduction for mortgage interest. He would allow it only for one principal residence (not a vacation home) and would apply the capital gains tax to sales of appreciated housing. Since the housing subsidy is the major political basis for excessive land use regulation, he says, bringing an inflated housing sector down to earth would moderate the not-in-my-backyard (NIMBY) syndrome.

Fischel’s number-two reform is to rethink the negative effects of conservation easements on urban structures versus their purported environmental benefits. Where urban development is possible, he says, perpetual easements are the worst form of suburban exclusion and a dubious gift to future generations.

The author does not hesitate to take on other favored techniques and traditions. Fischel questions regional growth management, federal enforcement of environmental laws, and rent control, among other things. He concludes with the admonition to “make only little plans,” since they are less likely to become opposition targets.

Fischel knows what he writes about. His expertise bridges municipal zoning law and economics. In addition to his position at Dartmouth, Fischel holds a chair in legal studies, even though he does not have a law degree. Zoning Rules! brings together his insights from some 40 years of analyzing zoning, dating back to his influential 1985 book, The Economics of Zoning Laws.

To support his theories, Fischel examines a wide range of regulatory approaches and judicial decisions. He dissects both Portland, Oregon’s urban growth boundary and Houston’s steadfast refusal to adopt zoning, as well as more traditional regulatory schemes. In the process, he does not hesitate to express his own opinion, such as that Portland should be “more like Atlanta.”

This book provides a definitive review of U.S. Supreme Court land use cases, ranging from the political backlash from the Kelo decision that allowed eminent domain, to the Lucas case that reined in coastal environmental regulators. Fischel not only researches the social and institutional facts of each case, but also visits the sites for a firsthand perspective. He walks the South Carolina beach where the plaintiff in the Lucas case initially was prevented from building and agrees with the Supreme Court that this was an overreach of state power, resulting in a regulatory taking.

A backbone of the book is Fischel’s economic theory of why zoning took root during the 20th century. Starting in the 1910s with ordinances in Los Angeles and New York City, zoning rapidly spread across the United States. Initially, it responded to the need to control unwanted development by industrial and apartment developers whose scope was expanded by the motor truck and jitney bus. Then, in the 1970s, inflation helped transform housing from a consumer good into an investment, leading to the rise of the growth-control movement as homeowners sought to protect their investments.

Some 21st-century urban development movements are not as thoroughly treated. Urban planning, form-based codes, and new urbanism get short shrift. Zoning is supposed to be consistent with a comprehensive plan, but the book’s index does not mention comprehensive planning. Perhaps the author’s attention to zoning history and his personal experience on a small-town zoning board keep him from focusing on the significant impacts of contemporary metropolitan plans. Perhaps his fascination with the intricate logic of economists and judges tends to limit his attention to the emerging role of urban design in promoting sustainable communities.

Still, the early history is crucial to understanding land use regulation today. Anyone who has attended a shouting match at a zoning hearing will benefit from learning how rezoning came to be such a deep-seated fear of American homeowners worried about their property values. And while the likelihood of reducing the federal tax subsidy for homeownership does not seem possible, the millennial generation’s preference for rental housing in walkable, mixed-use cities may make that a moot issue, gradually opening the way for more progressive urban development policies.

David R. Godschalk is planning professor emeritus at the University of North Carolina at Chapel Hill and coauthor of Sustaining Places: Best Practices for Comprehensive Plans (APA Planning Advisory Service, 2015).