How Zoning Keeps Homes Out of Reach, Increases Prices

Zoning laws should reflect community needs

The “American Dream” of owning a single-family home is becoming increasingly unaffordable for the average American. The national median price of existing homes, including condos, was $218,000 in October. That’s up nearly 17 percent from October 2004’s median price of $187,000.

Want to buy a house in California? The median price is $455,000 ($721,000 if you’re thinking of San Francisco). Denver’s median is up to $253,000, with Orlando hitting $261,000 and Las Vegas’ price jumping to $313,000 recently.

When we talk about the sky-rocketing housing prices of the last few years, we usually focus on mortgage rates, investor speculation, and high demand driven by local economic growth. But we often overlook a primary culprit behind rising prices – zoning laws.

Across the country, zoning laws consistently prevent new homes from going up in many locations and often unnecessarily block the transformation of neighborhoods that could provide affordable housing. After all, only about 6 percent of the nation is developed. Two-thirds of New Jersey, the nation’s most developed state, is open space. We have plenty of land to build homes – if politicians let them be built.

Restrictive zoning hits the housing market in two ways: It increases costs by adding to delays in approvals, and it reduces the number of homes built to satisfy demand. Economists Christopher Mayer and Tsueriel Somerville found that adding just three months of delay to the approval process could reduce new housing construction by 45 percent. But zoning and conventional land-use planning has an even more destructive impact. They prevent communities from changing to naturally meet new needs and community concerns.

Zoning laws are so arcane, even the Amish are trying to get the government to eliminate or modernize them. Amish farmers in a small Ohio town are confronting the declining profitability of their small, family-run farms. Instead of asking for handouts or taxpayer subsidies, the Amish want to adapt to the market by opening woodworking shops and other small businesses as they shift away from agriculture. Rather than commute into the nearest big city (the Amish do not drive), they want to start up new businesses on their farms.

One would think these aspirations would be welcome in an era of smart growth, where professional planners and environmentalists are scrambling for ways to get people out of their cars and preserve open space. But the home-based businesses the Amish want to start-carpentry, custom cabinet making-don’t fit the tidy little boxes of land uses allowed in the local zoning code. Local zoning laws say home-based businesses can’t be bigger than 1,000 square feet.

Their neighbors don’t object to the new business plans at all. But zoning and conventional planning is keeping them from becoming an economically and culturally viable part of the community.

Today’s zoning codes aren’t adaptable or flexible. They are intended to be bureaucratic instruments that control the behavior of local residents and businesses. The views of neighbors aren’t important, nor are economic benefits or aesthetics. The only thing that matters is the letter of the law and whether the law can be applied universally throughout the community.

Zoning codes can and should be reformed to contain a little common sense and recognize individual property rights and community interests. Local planning boards should look at the impact the proposed development will have on neighborhoods and the community. If the impact is positive or neutral, and neighbors don’t object, why should the local government stand in the way?

A critical key to keeping housing affordable will be loosening up the bureaucratic straight jacket of zoning to allow more homes of all types be built and meet demand. Without this flexibility, the ongoing mismatch between supply and demand will keep home prices higher than they need to be and keep the stability of homeownership beyond the grasp of too many Americans.

Samuel R. Staley, Ph.D. is director of urban and land use policy at Reason Foundation.