I was at a planning board meeting until 11:00 last night hearing expert testimony by the developer who wants to put in a bank at our corner.
Individuals who protest changes at the local level have gotten a bad rap. Sure, that same instinct to preserve property value has led to discrimination. People have refused to allow disadvantaged people or people of color into their neighborhood, and there is no excuse for that.
But this same instinct to protection one’s self-interest also drives people to stop business from polluting the nearby streams and rivers. Local home owners stop the local greedy politicians from getting hand outs from corrupt business owners. They stop local politicians whose only idea of progress is expanding business, rather than improving quality of life. They agitate for the improvement of schools.
I had some fun questioning the developer’s experts yesterday. In September, when the planning board reconvenes, I’ll have some more fun explaining why the corner lot should be residential.
However, the reality that we might lose our shirt on our house isn’t so fun. This morning, I e-mailed the town council and sent a letter to the local newspaper.
Apt. 11d 
What’s wrong with a bank? Is mixed use really such a bad thing? Does it always drive down property values?
I’ve got a bank down the block, a sandwich shop up the street and a little Baptist church facing my house. Personally, I wouldn’t want it any other way.
LikeLike
This is suburbia, not a cool city. We have a couple of nice walk-in banks around the corner and a coffee shop that I love. No problem with that. They want to put in a bank with three drive in lanes and no walk in traffic. The bank would be surrounded entirely by a car path, and the town would have widen one of the streets. The local political leaders want to turn that street into Burger Kings and iHops and these drive in banks.
LikeLike
Local home owners stop the local greedy politicians from getting hand outs from corrupt business owners.
Well, no, not really. Often local homeowners lobby for such restrictive general zoning rules that there’s a lot of unmet demand and potential profits blocked. This succeeds in arresting some development (so to speak)– but it also means that conditions are ripe for a bribery-and-waiver economy. The more potential development that needs zoning waivers to go through, the more corruption there will be– and the more you’re selecting for bad actors among the developers and politicians both.
Yes, local activists might then expose this or that instance of corruption. But often they’ve first created a structure in which corruption is more or less inevitable.
That structure is then almost impossible to reform– because the ability to effectively sell waivers is a pretty attractive kind of discretionary authority from politicians’ perspectives.
(I know this sounds like a kind of stereotypical public-choice-for-libertarians-101, but my views here are basically a sesult of seven years in Chicago, not of a general theory.)
LikeLike
(Which is not to say you’re not right about the particular case!)
LikeLike
Oh, and while we’re beating up on homeowners, how about the following scenario: homeowners vote to impede development in their area (perhaps to preserve green space, etc). Property values sky-rocket and prospective homebuyers are frozen out.
LikeLike
Without passing judgment on Laura’s specific situation, I can testify that Amy P’s aspect of development restriction is a massive, massive factor in my neighborhood.
LikeLike
I’m not sure if this is a Hudson Valley political culture thing or we can generalize this to nationwide thing, but in my area, there are gentlemen of a certain age. These gentlemen are quite certain that PROGRESS means mini-malls and Burger Kings — not parks, play areas, coffee shops, book stores, or residents. The never look at the long term interest of the community in terms of attracting future buyers who might not like Burger Kings or KFCs.
I actually had one of these guys wag his finger in my face, call me “missy,” and said I was against PROGRESS. I’m for progress, but I’m defining progress differently. For me, progress means attracting more attractive, walker-friendly commerce and attracting more professionals into our town.
Do my protests create the environment for corruption? Nah. This place has had corruption long before any do goers like myself arrived.
Without the zoning board and pushy people like me, the men of PROGRESS would have turned this whole place into suburban hell years ago. They might slip this bank through and then a Burger King next year through backroom deals, but I’m going to make it tough for them. They are going to have to really sweat it out to get this to happen. I’m going to tell the majority of the town, which is largely ignorant about any of this, what the facts are. I’m going to remind our elected officials of the needs of their constituency.
I would rather live with corruption than be a doormat.
LikeLike
I think it is impossible to underestimate the role of corruption in development in the NY/NJ suburban area. There is just too much money to be made, and the developers all seem to have the local politicians in their pockets. In my experience, though, the local homeowners protest all they want, but the developers do whatever they please and the politicians look the other way. That is, until the state attorney general’s office decides to investigate and the politicians and the developers get thrown in the slammer.
LikeLike
Jacob’s point about perverse incentives for corruption seems right to me (my experiences were Boston and Baltimore, but I’ve heard stories about greater Chicago that fit Jacob’s analysis), and Mrs. Coulter’s point seems sadly on the mark as well, from what I know about NYC politics.
But on the perverse incentives point, it’s worth pointing out that, for the suburban developments Laura is talking about, there has been a regulatory status quo at least since the 1950s that inspired some pretty cosy alliances in urban and state politics, and clearly favoured some actors over others in ways that were often unresponsive to some local preferences in particular neighborhoods.
That’s a clumsy way of saying that auto-related industries and developers did really well building cars, highways, gas stations, and car-friendly developments.
Regardless of what Peter Gordon would have us believe, this wasn’t merely a market response to benign and widespread preferences for big lots and low density, although no doubt that’s a big part of it. But it seems to me that there’s something weird about a regulatory status quo that takes a majority preference among affluent families and, without questioning the broader consequences of those preferences, makes alternative ways of urban life either really, really expensive or effectively impossible.
So while it may be the case that local voice, when successful, can create regulatory environments that select for corruption, it isn’t as if the status quo is more attractive for many homeowners and longtime residents — a point which Laura puts far more succinctly: “I would rather live with corruption than be a doormat.”
Of course, that can cut both ways (“sure I want them working as nannies in my neighborhood, I just don’t want their bus to stop near my house” — I actually heard something like this argument while living in Baltimore).
LikeLike
homeowners vote to impede development in their area (perhaps to preserve green space, etc). Property values sky-rocket and prospective homebuyers are frozen out.
This has been nagging at me for the last day. It used to be my default view about zoning’s effects (and it’s clearly a big part of the *motivation* for a lot of zoning), but now I’m having trouble thinking through the economics of how it actually works.
Short version:
1) Property values aren’t any higher than the demand for the property set by buyers.
2) High-population density regions have a lot of towns, suburbs, and municipalities in them.
3) Zoning is set municipality by municipality.
Ergo: the property owners of a town *can’t* pull their property values up by their bootstraps by limiting entry. They can create an artificial shortage in their tiny corner of the real estate market, but that doesn’t increase the market price of their acres– does it? They can freeze out some buyers, but can’t affect the quantity supplied in the next town over– that’s a route to *depressing* property values, isn’t it?
Or, looking through the other end of the telescope– if the highest property value for a given town really is McMansions on 10-acre lots with no possibility of high-density housing or hoi-polloi kinds of commerce, then the McMansion owners don’t increase their property values by banning that high-density housing. And if the 10 acres really would be more valuable subdivided up, then the McMansion owners can only *depress* their property values. One way or the other, they can’t magic above-market property values out of their zoning rules– can they? Loren? You know more about this stuff than I do.
I understand the collective-action stuff– any given 10-acre plot starts off more valuable put to other use than as a McMansion, but each such development depresses the value of the other McMansions, and the last McMansion surrounded by high-rises on all sides gets screwed– so everyone’s better off, etc. etc. Is that all that’s at work?
LikeLike
Jane Galt, are you out there?
LikeLike
Jacob Levy,
The piece you are missing is what I think of as the feedback loop.
Zoning is set municipality by municipality. Public services are provided municipality by municipality, and taxes to supprt those services are also levied municipality by municipality. Also (very importantly), due to an endless array of ill-designed laws, it is very hard to run a school system that provides a good education to most children once there is more than a tiny minority of disruptive children (and poorer children are more likely to be disruptive, on average.)
By zoning, one municipality can keep the valuable, cheap-to-service property in its boundaries, and the not-so-valuable, expensive to service property out. This means public services are better, and taxes are lower–and thus, property is worth more (since taxes are one ownership cost).
In addition, amenities are provided based partly on demographics. The people who want hubcap lots and Burger Kings are not the same people that want art galleries and nice restaurants. So a town that has a lot of wealthy people, living in nice houses, will have a greater proportion of the kinds of businesses that the wealthy people want to patronize.
LikeLike
Oh, good. This thread isn’t dead. I’ve been gone all day in Long Island and was thinking about it during my 3 hour drive back. Goddamn 7 mile backup on the Cross Bronx. F*ck robert Moses.
OK. Property value isn’t solely based on supply and demand across a region. Property value is a tricky number that is based on the town’s school quality, the appearance of the downtown, the demographics, the proximity to big cities. Sometimes even the house itself figures in there.
Returning back to my case, I would be increasing the value of my house by freezing out the quickie bank and replacing it with McMansions or high-end condos. Both of those options would increase the number of residences in my town, but they would be more beautiful and attract wealthier residents. Or if I supported a funky bookstore over the quickie bank, it would also increase the value of my house, because this would attract snooty buyers to the town who have deeper pockets to pay more for homes.
So, it’s not the freezing out of development that increases home value, but it’s the freezing out of certain kinds of development.
LikeLike
Good commentary. We moved from the unregulated upper west side of NYC to the most planned Socal community in the US.
The funny thing is that in both communities we had similar worries. We worried about the type of retail opening on our block ( hope it’s not another Duane Reade) as much as we worried about our new neighbor renting their 4 bedroom house out to medical students (Damn why couldn’t it have sold to a nice couple with children the same age as ours.)
LikeLike
“One way or the other, they can’t magic above-market property values out of their zoning rules– can they?”
Personally I don’t think so, although obviously there are plenty of ways to change property values through regulation. But I’m sceptical that exclusionary zoning actually does cause dramatic increases in residential property values in very many (if any) cases (in fairness, Amy didn’t actually say that; she simply noted that sometimes restrictive zoning changes and rapid gentrification do happen together).
I don’t doubt that some homeowners hope that this may happen when they form action committies, speak up at planning board meetings, and lobby council members to prevent certain kinds of development by aggressively enforcing or dramatically reforming existing ordinances. But my sense is that a lot of that sort of local engagement is more protective than prospective: there’s an assumption on the part of resident homeowners that their house is a solid long-term investment so long as the neighbhorhood stays roughly the same, in terms of land use composition and demographics, as when they bought in.
That need not be a very accurate assumption, of course, but I think a lot of homeowners believe it as an article of faith (they certainly do in my neighborhood, and the zeal with which oldtimers show up at city hall – to complain about any and all home rennovations that might conceivably lead to student rentals if the house sells down the road – is truly astounding! Alas, the revised bylaw often supports their complaints. And of course those oldtimers rarely renovate and repair their own houses, which end up eventally being sold to investors who turn them into student housing).
There are studies of zoning effects using hedonic price models that find various impacts, but my sense is that these studies (this one, for instance) tend not to say much of interest about the local and regional politics of homeownership and landuse debates, and certainly they don’t say much about the really interesting socioeconomic, cultural, and psychological currents that create and sustain dramatic upsurges of demand in some urban housing markets.
Race of course tends to dominate a lot of the U.S. findings (and the fears of white urban and inner-suburban homeowners about their neighborhoods). Ingrid Gould-Ellen did some interesting work a few years back on learning effects in stable racially integrated urban neighbhorhoods: some white homeowners stopped thinking of race as an indicator of neighborhood quality as they experienced their own diverse neighborhood.
LikeLike
Thanks, all — and especially Loren, for actually understanding the badly-worded question I asked, which wasn’t about how zoning in general can have any affect on property values. I understand the affecting-the characterof-the-neighborhood effects– and about the gamble it requires in guessing that you can guess what will be value-enhancing a few years out, as well as the gamble in thinking that you can carefully prune away only the commerce you don’t like without doing real damage to the neighborhood’s economy. (My local prejudice again: Chicago thought it could just zone out the blues clubs on 55th street– and forty years later Hyde Park still hasn’t recovered.) What I didn’t get was the pure supply-restriction model.
LikeLike
Ah, yes. 55th street. My dad grew up on the South Side of Chicago and went to the U of C. He often bemoans what urban renewal or “negro removal” did his beloved blues joints. He has some story about driving around drunk with Muddy Waters.
It’s funny, Loren, the old timers around here like all kinds of development no matter how ugly and environmentally dangerous. It’s us “young” residents who are picky.
I’m sure that total supply restriction is bad for a community. Banks and commerce are needed to provide services for a community and to provide taxable income.
In my case, they are trying to put a commercial property in a residential neighborhood. The used car lot is only there because it was set up in 1906 before the zoning laws were established and it was grandfathered in. Nothing else can go there without rezoning the area. There’s a perfectly good commercial district three blocks away with openings and that would be a great place for a bank. All would be happy with that.
55th Street isn’t really a fair example, because really the main goal of kicking the blues joints was to change the skin color of the neighborhood. They also didn’t really set up another zone for commerce. 57th Street is lame.
There’s got to be place for some supply restriction. Look what Robert Moses did to the South Bronx with the Cross Bronx Expressway. He slapped it right in the middle of a vibrant neighborhood and destroyed it.
LikeLike
Can one town raise the values for the entire area by restrictive zoning? Obviously not. However, in this case the actions taken by individuals mirror those that raise regional prices: zoning for less density, and any sort of services that might be consumed by poor people, such as fast food, big box stores, and so forth. Every individual town that blocks a condo development, forces acre or bigger lots for housing, and zones out low cost retail (by controlling square footage, road access, operating hours, or what have you) makes your town a more expensive place to buy a home, which is good for the existing homeowners. It also drives up home prices in your region by some fraction. The New York City equivalent is apartment owners who don’t want taller buildings blocking their light, or want each and every picturesque brownstone on their block made a historical landmark.
The result is a widening disparity of incomes, as the very poor end up with EVERYONE’S Wal-Marts, Burger Kings, housing projects, and so forth, because their towns are desperate for the tax revenue. One could make an argument that this is economically efficient and desireable–the rich pay the poor to live next to Burger King, and everyone is better off. But the sociological effects of that kind of separation, particularly in the schools, are large and in my opinion, undesireable. The regional effect is that it’s harder and harder to start a family unless you make a whole lot of money, and people like me end up living in 400 square feet. My best friend had to move to Florida because she can’t afford a kid in the Northeast.
I don’t know what will happen on the coasts, where there is little farmland left to develop and zoning is pushing more and more people out of the region. Increasingly, the coastal areas are attracting wealthy professionals, and people who live in government subsidized housing, and nothing in between. That doesn’t mean Laura’s wrong about the bank (though don’t people have to bank *somewhere*? 😉 But in general, I do find zoning very troubling.
LikeLike
Yes, housing prices are outrageous in the coastal regions. It took us nearly a year to find a house, and we had luck on our side that day.
However, it not fair to blame the high home costs on zoning regulation and protective residents. The real estate bubble has many causes that I don’t need to go into at this time.
Our town has a Wendy’s and a KFC. It’s on one section of town, along with the 6 other banks for this town. There is space for another bank and we’re all happy if it goes over there. Nobody is pushing the bank to a poorer town. The trouble is that the developer is putting the bank in a residential neighborhood, because he wants to reshape the downtown.
I think that zoning laws don’t raise property value, but they do keep them constant. As anyone who’s played a lot of sim city knows, you put a business in a residential neighborhood and the homes turn to slums.
And why should people be criminalized for caring about their home values? This is a working class community and people sink every cent they have into their homes. They spend hours rehabbing them by hand. Their homes are their only investment. They should protect themselves.
Thank God for zoning laws that at least slow down the corrupt developers who have little regard for the democratic process. Citizens should have the right to collectively decide what their community should look like.
LikeLike
And why should people be criminalized for caring about their home values?
Er… who said they should be?
Nobody’s criticizing you for doing what you can within the system that currently exists. But your post invited an expansion into consideration of that system.
Thank God for zoning laws that at least slow down the corrupt developers who have little regard for the democratic process.
Again, I’ll say that there’d be no reason for them to be corrupt, and to do such damage to local democratic processes, in the absence of zoning– and that, given zoning, they inevitably will be and do just that.
A comparative question (Loren again, maybe)– is it like this everywhere? Are there places that manage to have property-use regulations that *aren’t* operated on an endlessly-arbitrary basis of waivers, hearings, and votes, regulations that it’s possible to just know in advance and to work within?
LikeLike
You’re right, Jacob, to try to broaden this discussion. (Help Loren) Are there examples of communities with sane zoning regulation? Are they examples of places that have few zoning laws and still attract middle class communities?
We just come at this issue from such different perspectives. For you, zoning regulations frustrate enterprise and self-determination. For me, even the most honest developers must be questioned by the community, because their actions impact on everyone around them. A new minimart in a community will attract traffic that could make it difficult for kids to cross a street. It might attract crime. It may have lights that shine into neighboring homes. The entire community may be affected by that business and, therefore, has the right to publically discuss and debate and regulate its existence.
LikeLike
For you, zoning regulations frustrate enterprise and self-determination.
Really not the kind of thing I’ve been talking about. It’s the general social, political and economic effects of the current zoning reigme, not the self-determination or entrepreneurial spirit of real estate developers, that concerns me. And I don’t advocate rulelessness in land use. (I agree, one wants nuisance rules that can handle traffic problems, noise, and light as well as pollution– though I incline to be more suspicious of light regulation, since residents can block most outside lights pretty cheaply, which they can’t do with noise or pollution.)
As an aesthetic and lifestyle matter, I’m strongly in favor of lots of mixed use (and have left Hyde Park for a thriving mixed-use neighborhood in Montreal, where there are bars and dollar stores and yupscale furniture and clothes stores and comics and gaming shops and endless restaurants and coffee shops within a four-block radius). This certainly colors my views. But I understand that urban mixed use isn’t for everybody, and that there are good reasons for people with kids to want purely-residential suburban neighborhoods.
But I think the zoning system as it exists is a terrible one. It’s essentially discretionary rather than rule-of-law based. Where the profits to be had are high enough, it basically guarantees the existence of rules-and-waivers-for-sale. And where the profits to be had are marginal, it runs serious risks of strangling towns or neighborhoods.
Finally, I’ll admit that I don’t find the participatory democratic determination of land use to be anything especially worthwhile for its own sake. I find it actively undesirable that the determinations get made case-by-case instead of with clear rules. In a tenth-best system where lots of case-by-case stuff is happening behind the scenes anyways, case-by-case participation is a needed corrective. But that’s the best that I think can be said for it.
LikeLike
On the principles at stake, I have to say I’m torn here (and unfortunately I’ll babble on at ridiculous length, but I’m too lazy to edit this properly – sorry).
I share Jacob’s concern with perverse incentives for corruption. I also like Jane’s characterization of exclusionary zoning as locational freeriding (‘of course I want a Wallmart – just not here’).
On the other hand, I like Laura’s point about democratic accountability: most development affects residents, many of whom can count their homes as their only significant investment, and they don’t want their kids mowed down in the street by drivers in a hurry to get from their drive-through bank to their drive-through Burger King. It seems reasonable that developers and their advocates ought to answer to the people whose lives (and property values) they change.
The really vexing question, of course, is how to balance liberty and accountability in principled and attractive ways that everyone can live with.
This has been bugging me all morning. I’ve had a hard time thinking up examples that clearly meet the criteria in Jacob’s and Laura’s latest posts, i.e. sane regulations about land use without excessive bureacracy and associated rent-seeking and corruption, relatively few ordinances but a strong showing of middle-class homeowners in economically viable and generally livable (a fuzzy term, I know) neighborhoods.
There is at least one intriguing case of local groups seizing zoning power in clever and constructive ways, and then coming up with inclusive, transparent, and fairly uncluttered strategies for determining land uses. I’m thinking here of Boston’s DSNI. But this doesn’t meet all of the criteria: the whole area is still very poor, so not much by way of middle-class homeowners in the sense of suburban communities such as Laura’s (although that may be changing).
There are experiments with regional governance that try to coordinate and regulate local development, providing a middle-layer of regulation and oversight between municipality and state (i.e. Portland, OR and the twin cities, MN). But while these sorts of arrangements do have some promise in finding constructive solutions to urban-surburban spats about land uses and service provision, I’m not sure they necessarily count as streamlined bureacracies. (They do some of what Jacob mentions, however, insofar as they seem to provide some sort of overarching regulatory stability in the region. Now, whether or not that’s a good thing, or just another layer of problematic bureacracy, is an important debate: the Portland experience of course generates a lot of argument about the goods and evils of growth boundaries and regional governance).
Not exactly on point, but relevant to the thread: several years ago a former graduate student from Jacob’s old stomping grounds did an interesting paired-cases study of zoning and racial segregation.
The finding (zoning doesn’t seem to matter: people find ways to create spatial segregation with or without it) is perhaps unsurprising given the importance of race in American politics and culture, and also for anyone who has read Shelling’s Micromotives and Macrobehavior. There are some endogeneity concerns also.
The research design is clever, however, and there’s some interesting discussion of Houston, which replaces local zoning powers with deed covenants (although since the covenants are typically introduced by developers and enforced by homeowner associations through votes, it isn’t clear that the contrast with traditional zoning politics is all that great in practice, although in a way that’s Berry’s Coasian point – anyway, here’s the abstract).
Christopher Berry, “Land Use Regulation and Residential Segregation: Does Zoning Matter?” American Law and Economics Review 3, 2 (Fall 2001): 251-74. Abstract: “Critics of zoning have attributed to it much of the responsibility for the persistent and severe patterns of racial and economic segregation that characterize urban America. Yet, little empirical evidence has been produced to demonstrate the degree to which observed patterns of residential segregation are attributable to zoning. This article explores that question by comparing patterns of residential segregation in Houston, the nation’s only unzoned large city, and Dallas, a similar zoned city. Houston’s unique system of “nonzoning” is described. The index of dissimilarity is used to measure segregation by race, tenure, and housing type, and a variation of the index is developed to measure segregation by income. No significant differences in residential segregation are evident between the two cities. These results suggest that, absent zoning, private voluntary institutions produce nearly identical patterns of residential segregation.”
LikeLike
I love urban, mixed-use neighborhoods. I still miss the neigborhood coffee shops and bodegas from the city and would run back to NYC tomorrow, if someone gave me a sack of cash. I chose to live in walking distance from an older town center with sidewalks. Mixed use with suburban style drive up businesses and front lot parking lots are a different story. They have a history of destroying community life and don’t look anything like downtown Montreal. (Which should be great, btw, and congrats on the new job.)
I find it actively undesirable that the determinations get made case-by-case instead of with clear rules. I love clear rules, especially if there was some participatory democracy that set them up in the first place. (Maybe we’ve been talking past each other.) In our town’s case, we’re on the side of the clear law, while the developer is seeking a variance. I guess the problem is that communities are organic things that change rapidly; it’s difficult to make clear laws that remain fair or sensible over time.
LikeLike
Thank, loren, for providing some real examples to this discussion and for playing moderator.
Interestingly, I think we all desire the same types of neighborhoods — walkable, urban, affordable, safe. It’s just a question of how you get there with little corruption, with respect for the hard working residents, without cutting out the poor or minorities, and without destroying the local economy. It’s certainly a balancing act, but one that is surely fun to debate. Thanks, guys, for the excellent debate.
Anybody going to Philie for APSA?
LikeLike
Laura: “Anybody going to Philie for APSA?”
I’ll be there for Saturday afternoon through Sunday morning, which means I’ll miss your blogging panel Laura, sorry 😦
LikeLike
Loren and I are on a federalism panel together, as it happens– but in the always-undesirable Sunday 10:15 slot!
LikeLike
I’m so sorry to miss your joint panel! It would have been fun to see you guys on the same panel. I have to arrive on Thursday night, so by Saturday morning, I’ll have to scram. More than two days at APSA isn’t good for my mental health. Loren, it looks we’re going to miss each other altogether if you’re coming in on Saturday afternoon. Next year, we’ll have to arrange things in advance. Jacob, I hope you’re coming in earlier. Beers?
LikeLike
Have any of you lived in or visited Houston?
Two things make it fascinating: 1) No zoning (really!), and 2) No parasitic suburban governments.
The results (combined with a geography that facilitates Phoenix-like sprawl) are a diverse and tremendously affordable city. Not pretty, nor walkable, but I can’t imagine a place I’d rather be poor in.
LikeLike