Zoning Rules!: The Economics of Land Use Regulation

by William A. Fischel

Once dismissed by economists as a paper tiger, municipal zoning is now regarded as a major influence on the development of American cities. Zoning Rules! explores the behavioral basis as well as the economic effects of local government land use regulation. This requires not just an economic model of how zoning works but a deeper understanding of the social, political, and technological factors that guided its history over the last century. Zoning’s popularity is due to its success in protecting the value of single family homes, and anti-sprawl reforms must take this into account.

Genres: Economics, Urbanism, Urban Planning, Politics, Nonfiction, Cities, Law

467 pages, Kindle Edition

First published July 7, 2015

Reviews

[Frank Stein · Rating 5 out of 5]

Although this book is often, and self-admittedly, repetitive of his early works, as usual Fischel is an indubitably sharp and witty writer, who leads his readers through the thickets of contemporary law and economics relating to land with panache.

One of the main insights of this book is that much of land use regulation is "demand driven" and not "supply driven." While historians tend to focus on the major planning advocates and judges, like Edward Bassett and Justice George Sutherland, in reality city planning and zoning emerged in hundreds of different cities beginning in the nineteen teens, and paid little heed to planners or jurists. Although planners long lamented "grandfathering" non-conforming uses, cities ignored them and kept them in place. When a New Jersey court declared zoning a taking of property in 1927, the voters passed a constitutional amendment the same year legalizing the practice, and a similar reaction against a court ruling happened in Georgia. In all of these cases, it was millions of different people, and not conspiracies from on-high, that created our modern zoning system in the Progressive Era. Fischel argues that the footloose truck caused residential suburbs to push zoning and resist annexation to keep out unwanted industrial uses. This had little to do with race, as mixed race and purely white areas embraced zoning similarly, but everything to do with protecting property values.

Fischel also argues that the "Quiet Revolution" of growth management since 1970 is a result of a combination of the increase in automobile ownership from 59% in 1950 to 82% in 1970, bringing more poor residents to outlying areas, an increase in land values caused by inflation, along with the creation of new organizations emerging from the anti-highway revolt and environmental movements. These new groups succeeded in using courts to fight development, and also succeeded in creating "double veto" regional bodies that could foil most new development, especially on rivers and along the coasts, and most especially in California (such as the 1972 referendum for the California Coastal Commission). Instead of "fiscal zoning," where cities tried to attract the right mix of land-uses to protect land that paid property taxes, many suburbs in the 197s0 became completely opposed to any additional use, vastly driving up land prices, while property taxes declined as a proportion of revenue.

There are dozens of little stories and insights here, from the demand curve of monopolistic suburbs, to the problems with equitable solutions to zonings takings, and a few sensible, minor solutions for reform (scale back the imputed rent subsidy to homeowners; allow courts to act more like Pennsylvania's, to force injunctions for excessive zoning if not reformed). The book should be read by anyone and everyone concerned with local politics and housing issues in America.

[DW Rowlands · Rating 4 out of 5]

I have complicated feelings about this book. I fundamentally disagree with William A. Fischel's ethics and understanding of the point of regulation—unsurprising given he's apparently part of the "law and economics" movement—but it did seem like a very good and detailed summary of how the American land use regulation system works and how people who support Euclidian zoning justify it.

By the way, the fact that William A. Fischel essentially described environmental justice as paternalism and argued that poor people voluntarily choose to live near areas of high pollution because they want to was a bit horrifying.

[Evan Þ. · Rating 5 out of 5]

Fischel looks at zoning from an economic perspective: what are different people's incentives in designing zoning, what are their incentives in responding to it, and what world does that give rise to?

This makes me really appreciate the reasons for zoning for the first time. Property-owners have an investment in their property, and some things nearby will have negative effects on the neighborhood - which might be individually small, but in aggregate they're noticeably disturbing. So, the property-owners band together to get the government to pass a zoning law. This, Fischel shows, was how zoning actually did start in a lot of American cities.

Unfortunately, zoning also has a bad impact on overall property development. New houses and businesses are getting built; it's just that they're being built in less-desirable locations for higher prices. In a vicious cycle, those higher prices mean that families have more income invested in their houses, which means they have more interest in protecting it from anything that might decrease its value, which means they want even stricter zoning laws.

Near the end of the book, Fischel suggests a few policies to reform zoning by changing these economic incentives: a rule to compensate people when rezoning keeps them from using their property as they want, and insurance to compensate property owners when their value decreases due to new nearby construction. There're some problems with these, as he mentions. However, unlike more sweeping policies that've been proposed, these strike directly at the economic incentives involved with zoning.

[Andy Mcloughlin · Rating 4 out of 5]

Easily the best book about the history and economics of U.S. land use regulation that I have ever read.
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In all seriousness though, this is a great introductory text for anyone interested in urban geography and the forces that shape it. A lot of it is extremely specific to the U.S., and I recommend skipping those parts, but I haven’t found a clearer explanation of the economics of land anywhere else.
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One thing that makes this book particularly interesting is the fact that Fishel is himself a member of a local zoning board in Hanover, which tempers a lot of his theorizing. Most commentators that I hear invoking Fishel are eager to centralise planning at the city level, but Fishel himself doesn’t actually push for that policy. Instead, he seems more optimistic than most about the possibilities of lowering the economic centrality of homeownership through changes to the tax law.
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More significantly, though, Fishel has a clear sense that the core question is not whether we regulate land use, but how. I’m about as pro-growth as it gets, but this book really makes it clear that such a mindset is not a free pass on thinking critically about these things.
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Finally, I should state the obvious and say that this book is very relevant to Irish housing policy right now. Whatever solution to the housing crisis we eventually land on, a massive increase in residential construction is going to have to be a part of that solution. This book doesn’t offer easy answers about how that growth should be planned, but it does make it clear that the question is unavoidable.

[OutboardCap · Rating 4 out of 5]

This was a very informative read and a brilliant overview of Zoning practices in the United States, the history involved, the economics, and political power dynamics at play when an area transforms from a rural to suburban or urban community. I can say that I learned a lot and was even pleased to find a discussion of Median voter theorem and the irrational voter theories advanced by the likes of Caplan. The content here is great and Fischel finishes what he set out to do.


That said, this book is a slog. The writing is extremely academic and repetitive. it is written more like a series of a hundred small papers. Some sections are better than others, but I would recommend reading it in short bursts rather than powering through.

[Amber · Rating 4 out of 5]

Very good, but somewhat difficult to get through for me as most economic reviews seem to be based on rationality and somewhat confusing analysis.

I appreciated the author's point of view as far as why zoning exists (thank local homeowners demanding protections for their home values) and how zoning effects communities.

[Andrew · Rating 4 out of 5]

This was a difficult book to rate. I found it very informative but quite dense and occasionally dry. I came away with a more nuanced understanding of the causes of some of the development problems the author addresses but was disappointed by the author’s proposed solutions.

[Tim Staub · Rating 5 out of 5]

Fantastic combination of personal and historical examples. Fischel does a good job breaking up how zoning has impacted many of the things we see as normal in our lives.

[Du · Rating 4 out of 5]

Clearly an academic book, but here that works really well. I liked the focus and the drive of the narrative, keeping the idea that not all zoning is for land use regulatory impact, that there are other impacts and reasons to create and update zoning in a community, and that some of those impacts are economic for the community, both via tax revenue and general economic development.

[Michael Lewyn]

Explains the history of zoning, why it became popular, and why it has become more restrictive over time.