How Much Impact Do Zoning Laws Have?

Do zoning laws really have much of an impact?

In my experience, developers who want to build in undeveloped or blighted areas not zoned for a proposed project are often effective in securing zoning law changes. Zoning laws may stifle innovation and change in more prosperous, already developed areas. But, most of the time, that is not where developers want to build, because the cost of acquiring improved land and scraping or renovating the improvements on it area so high. Denver's recent wave of scrapes, pop tops and other infill development is an exception to the usual state of affairs, and even then, more often than not, development has gone forward until a very recent wave of downzonings.

But, then again, I've never lived in California. According to a March 4, 2009 op-ed article in the Los Angeles Times by Edward L. Glaeser, a professor of economics and director of the Taubman Center for State and Local Government at Harvard University (hat tip to the Volokh Conspiracy):

Although California is a populous state, it still has plenty of land. Santa Clara County, the home of Silicon Valley, only has about 2.2 people per acre. Even in denser places, such as Los Angeles, there is plenty of room to build.

California’s growth has slowed because the state has made it increasingly difficult to build new homes. There is an almost perfect correlation between the growth of an area and the amount of housing that is permitted in that area. California has some of the toughest land-use regulations in the country, which are often justified as environmental measures. When high housing demand is met with restrictions — not construction — California homes become unaffordable and new construction goes somewhere else.

I'm skeptical of, but fascinated by, this claim. I know that growth boundaries have had bite in Portland, Oregon, but wasn't aware that zoning laws had so much bite in California, and I'm still not convinced that they do.

One way to think about a zoning law is as a democratic veto on land use innovation. Permission for unanticipated uses will often be granted when someone comes up with a new use for land, but only after a politically appointed planning board or local government governing body approves the decision. While federal and state governments tend to pass laws with general principals in mind, municipal ordinances are frequently directed at a very small number of cases, and spot zoning is just the most notable example of this tendency.

Perhaps, California simply zones almost all of its land so that it can't be developed, but routinely approves just in time rezonings for new developments. Zoning often simply ratifies the status quo, and rezonings are routinely approved if everyone who owns impacted land agrees. This would lead to the "almost perfect correlation between the growth of an area and the amount of housing that is permitted in that area" even if rezonings are routinely approved.

It is also possible that earlier large lot subdivisions have swallowed up available land, and that the owners of the land in unblighted areas have either been unwilling, or not permitted by private land use covenants, from further subdividing their land without prohibitive transaction costs. Turning 160 acres owned by a single farmer in an unincorporated part of a county on an urban fringe into a subdivision isn't that hard to do, even if it isn't currently zoning for housing. Turning a 160 acre subdivision filled with five acre multi-million dollar ranchettes that are part of a covenant controlled development with an HOA into higher density housing is a much more formidable task, even if a dozen of the ranchette owners are agreeable to selling out. The fact that low density uses can't easily be converted to high density uses doesn't necessarily imply that zoning is the main culprit.

There are three reasons, at least, that I'm skeptical of the implied claim that command and control style land use restrictions in California are a drag on its ability to increase its housing stock.

One is that so much of California has a low population density. If buildable land were really scarce, one would expect to see the high housing densities of Manhattan, of Portland, Oregon, of San Francisco, of Tokoyo and of Hong Kong, where natural boundaries (or international borders) make developable land scarce. Los Angeles and Silicon Valley don't show the kind of densities one would expect if land were scarce and as a result land values were so high.

A second is that I suspect that county level population density figures in California are deceptive. California has counties with very large land areas that don't closely track the boundaries of urban development, and a large share of California's land has mountains or other geographical features that make it unsuitable for development.

A third flows from the housing bust in California. We know now, as many people including myself had suspected for a long time, that high housing prices in California were the product of a speculative bubble that outstripped the economic fundamentals. California has a large excess inventory of new housing whose construction was fueled by that bubble. Post-bubble housing prices are more affordable than they've been for many years, foreclosures are rampant, and California's landscape of dotted with empty, often half finished, new housing developments. This is not the mark of a housing market that has been unduly constrained by zoning and environmental laws from building new units. The drivers behind new housing development and the current brake that has been placed on new construction appears to be driven by the financial sector's follies, not state and local land use regulation. While the author argues that because of California's land use restrictions, "new construction goes somewhere else," I'm curious to ask where. Construction has not gone somewhere else. It has ground to a halt, nationwide. New construction certainly hasn't relocated to Nevada, Arizona or Florida.

None of this, of course, shows that California's zoning laws are good. It simply suggests that they may be irrelevant in the cases that drive that state's population and housing stock growth, in which case, the cause of California's economic woes (and the solutions to them) must be found elsewhere.