Zoning Rules! the Economics of Land Use Regulation

Abstract

Zoning Rules! The Economics of Land Use Regulation William A. Fischel Cambridge, Mass: Lincoln Institute of Land Policy, 2015, 432 pp. Something has gone terribly wrong in America's cities in the last few decades. Real estate construction has fallen behind demand in cities like New York, San Francisco, Austin, and Miami. Rents are rising, and both current and prospective residents are having a hard time keeping up. The good news is that we know why this is happening. Mainstream economists agree that burdensome restrictions on building new housing in prosperous cities hurt economic growth, exacerbate inequality, and stifle entrepreneurship. The bad news is that it's going to be a huge challenge to fix. This is the lesson that Zoning Rules! teaches us. The book is the magnum opus of Dartmouth economist William Fischel, the follow-up to his acclaimed 1987 book The Economics of Zoning Laws. In the nearly 30 years between these tomes, Fischel spent his career exploring how land use rules came to be and what role they would play in the economy and society. Through careful history, a thorough understanding of property law, and sound economics, Zoning Rules! weaves a story of the rise of the exclusionary zoning laws that have come to strangle housing development in major metropolitan areas. The early years of zoning laws were relatively harmless and mundane compared to what would come later. Urban planners and the officials they appointed generally made pragmatic decisions that reflected the opinions of their constituents. When excluded from one town, developers could find another nearby. Minority factions had trouble blocking development if they lacked political power. It was the era of "good housekeeping" zoning. Fischel defines "good housekeeping" as basic separation of activities, such as noxious industry from residential areas, without attempts to control or micromanage growth. The period saw a boom in suburban building that would taper off over time. Fischel's theory is that something changed in the 1970s. A confluence of events precipitated the rise of exclusionary laws in the suburbs of the nation's cities. Employment decentralized from areas near ports with the advent of trucking, the interstate system, and the shipping container. Freed from center cities, industry fled to places where land was cheap and plentiful. The period saw housing grow to take up a greater share of household wealth. Combined with the civil rights movement's reforms, the period saw a serious increase in demand for exclusionary housing restrictions. Yet, demand is only part of the story. The supply pressures of exclusionary laws were serious. Unlike labor or capital, moving land from one municipality to another, while not impossible because of processes like municipal annexation, is a serious challenge. With ability to relocate to places with more hospitable legal institutions, weak zoning laws play a key role in the land use decisionmaking process. The period also saw the federalization of the environmental movement combine with the expansion of legal standing of development opponents and the advent of multilayered review by state government. Different departments and government bodies were given power to oversee various aspects of building. Development was bureaucratized, and with it, the transaction costs of the building process increased. The power dynamics of local government underwent a fundamental change. What was once a regime of "good housekeeping" laws was corrupted. More than anything, Zoning Rules! is a textbook of land use economics. Fischel is no pundit. Indeed, his grand theory isn't presented until the middle of a chapter in the middle of the book. Like its predecessor, Zoning Rules! is written to both explore and explain. It begins with a chapter laying out basic concepts of land economics, the basics of supply and demand for housing. The second chapter explains how zoning laws work and how they are administered. …