THE FISCAL/ECONOMIC IMPLICATION OF ZONING. THE ECONOMICS OF LAND USE REGULATION.
ESV Gordin Nwako
What is Zoning? Zoning is a governmental restriction on the manner that land can be used. It allows governments to control the development of communities and ensure they are functional and safe places. Zoning is a device of land use planning used by local governments in most developed countries. The word is derived from the practice of designating permitted uses of land based on mapped zones which separate one set of land uses from another.
Zoning may be use-based (regulating the uses to which land may be put), or it may regulate building height, lot coverage, and similar characteristics, or some combination
of these. It is also the art of sub-diving a town or a stretch of land into areas subject to particular planning restrictions.
Zoning refers to a common practice in city planning, wherein a master plan is developed to decide how land should best be utilized. The master plan breaks a region up into various zones, dictating what sorts of things can be built in these zones and what kinds of businesses are acceptable. Zoning laws can get extremely complex, and many people who are considering the purchase of land would be well advised to consult their local city hall about prevailing land use laws, to ensure that they will be able to use their land as they wish to.
The government, usually a local municipality, town or township, sets the zoning rules
and regulations for any given area. There may be a number of different classifications
set up under these zoning laws. For example, an area may be zoned “residential.” There are also different types of residential zoning. Some residential zones allow for single family homes, while others allow for apartments and townhouses or mixed housing. Other examples of broad categories under zoning laws include areas zoned “commercial”, for businesses, or “agricultural”, which would allow property owners to have livestock.
Zoning Ordinance:
A zoning ordinance is the formal codification of land use policies for a city, district, county, or other unit of government. The goal of a zoning ordinance is to establish permitted uses for land covered by the ordinance, and to distinguish between different types of uses which may be incompatible.
In addition to defining specific types of land use, zoning ordinances also usually divide a region into zones where certain types of permitted use can occur, which explains the name.
Historically, once people bought land, they were largely allowed to do whatever they wanted with it. Someone could build a house, install a tannery, start a factory, or utilize an area for farming. Over time, cities began to put building restrictions in place for the purpose of protecting public safety, and by the early 1900s, several cities had
specifically created zoning ordinances to address varied types of land use.
Within a zoning ordinance, the law usually distinguishes between residential, high density residential, commercial, light industrial, industrial, agricultural, and other
types of land use. The law provides clear definitions, which usually include the
amount of square footage which can be constructed within a specific zone, and the
types of activities which may take place in each zone. In a conventional residential district.
Zoning is usually designed to create low to medium density, which might include duplexes and single family dwellings. By contrast, commercial or high density
residential might allow for many more units within the same space.
Reasons For Zoning:
The major reason for zoning is actually to conserve and make judicious use of land
which is a major factor of production and fixed in supply by nature? Zoning actually
tends to regulate the use of land and its resources for the good of mankind. For
instance, if an agricultural land is converted into a mega residential estate, one need
of man will be met which is housing, but the actual need for which the land is best
suited for is for agricultural purposes (especially if the land is very fertile). The opportunity cost of changing the use of such a land may be very high. This is where zoning comes into play. A land rich in mineral resources will not release its best potentials if used for planting corn. Some other reasons for zoning include:
When a zoning ordinance is formulated, it usually reflects the fact that people
find certain types of activities conflicting. For example, a factory would not be a welcome addition to a residential neighborhood, while in a live-work district which included mixed commercial and residential zoning; an office tower might be viewed as a source of conflict.
Zoning ordinances are designed to separate different types of use to prevent conflict.
These ordinances may also preserve certain aesthetic ideals, such as a desire to keep structures in residential neighborhoods under three stories tall, and in some cases public safety issues may be addressed as well. For example, a zoning ordinance may mandate the installation of specialized street lights in commercial districts so that it will be safer to be out at night.
Zoning laws serve to protect existing businesses and residences. For example, in a region without zoning laws, a company could build a factory in the middle of a residential zone, potentially impacting the quality of life for residents. Zoning laws ensure that land use is consistent within a specific region, and that conflicting uses like heavy industry and residential housing are kept isolated from each other for the convenience of all.
Besides restricting the uses that can be made of land and buildings, zoning laws may also regulate:
The dimensional requirements for lots and for buildings on property located within the town (i.e. in some areas, you may not be able to build a home unless it is on at least an acre of land).
The density of development, and whether you can have pigeons, dogs, sheep or llamas.
The extraction of natural resources from land within the zoned area.
The space available for hospitals, parks, schools, and open space.
The protection and preservation of places of historical significance within the community.
The main purpose of these and other zoning laws is to create a community that is a
safe, logical, and comfortable place to live and work. Without zoning laws, factories could spring up next to nice homes and neighborhoods and playgrounds could be
dotted amidst bars and nightclubs. Zoning laws are thus an important part of urban
and community planning.
Zoning ordinances are constantly being changed to reflect shifting beliefs about how
land should be used, and how communities should deal with changing social norms.
The most current version is usually on file at local government offices, and as a
general rule, the zoning of a piece of real estate can only be changed when the
owner applies for a change of zoning, in which case the owner will usually need to present supporting evidence for the change at a public hearing.
Types of Zoning and Classification:
Basically, urban zones fall into one of five major categories: residential, mixed residential-commercial, commercial, industrial and special (e. g. power plants, sports complexes, airports, shopping malls etc.). Each category can have a number of sub-categories, for example, within the commercial category there may be separate zones
for small-retail, large retail, office use, lodging and others, while industrial may be subdivided into heavy manufacturing, light assembly and warehouse uses. In the
United States or Canada, for example, residential zones can have the following sub-categories:
Residential occupancies containing sleeping units where the occupants are primarily transient in nature, including: boarding houses, hotels, motels
Residential occupancies containing sleeping units or more than two dwelling units where the occupants are primarily permanent in nature, including: apartment houses, boarding houses, convents, dormitories.
Residential occupancies where the occupants are primarily permanent in nature and not classified as Group R-1, R-2, R-4 or I, including: buildings that do not contain more than two dwelling units, adult care facilities for five or fewer persons for less than 24 hours.
Residential occupancies shall include buildings arranged for occupancy as residential care/assisted living facilities including more than five but not more than 16 occupants.
Some areas are considered grandfathered because the developments date back
to the 1800s. Such areas are called grandfathered because they existed before zoning laws came into being. What zoning laws now provide is that when such properties are gutted by fire or destroyed beyond a certain limit, the owner will not be allowed to rebuild the property. The new zoning compliance for the area will come into effect at the time. A variance would however be obtained from the local zoning office before such a property can be rebuilt. This would require a planning board meeting and a public hearing to take effect.
Conditional zoning allows for increased flexibility and permits municipalities to
respond to the unique features of a particular land use application. Uses which might
be disallowed under current zoning, such as a school or a community center can be permitted via conditional use zoning. Some of the new gated developments are also covered under this rule.
According to Michael J. Pogodzinski, the effects of zoning on economic agents can be divided into six categories namely:
Supply side effects
Demand side effects
Tie-bout effects
Externality effects
Endogenous zoning
Rent seeking behavior
The supply side effect is concerned about how zoning affects the suppliers of housing services and the land market. Demand side effect is concerned about how zoning affects consumer choice of the optimal consumption bundle, especially the choice of housing characteristics.
Tie bout effect results from consumer mobility in response to zoning. Externality
effects include production externalities, externality associated to non conforming
uses. Endogenous zoning studies attempt to explain why particular zoning regulations arise. Rent seeking behavior involves the expenditure of resources by individuals to maintain zoning ordinances in pursuit of their self interest.
A complete analysis of zoning involves a careful consideration of all these effects as it mostly affects both the demand for and the supply of housing.
Fiscal and Economic Implications:
Much criticism of zoning laws comes from those who see the restrictions as a violation of property rights. It has been argued that zoning boards and city councils can too easily strip property owners of their right to unencumbered use of their land.
It has also been argued that zoning laws work against economic efficiency and therefore hinder development in a free economy.
A poor zoning restriction could hinder the optimal efficient usage of a given area.
Even without any zoning restrictions, a landfill, for example, would likely gravitate to cheaper land rather than being placed in a residential area.
Also, strict zoning laws can get in the way of creative developments like mixed-use buildings and can even stop harmless activities like yard sales.
Some critics argue that zoning laws is another way of economically empowering one neighborhood to the detriment of another so that local authorities will collect more taxes. Historically, zoning laws were also used for the purpose of racial, ethnic, religious, or class discrimination and they still believe that zoning laws are discriminatory.
The government uses zoning laws sometimes to exercise their “power of eminent domain” by compulsorily acquiring privately owned properties for overriding public interest. Critics have argued that most of the time this interest is in favor of politicians and not for the public as claimed.
Conclusion:
Zoning is a policy which the Government uses to regulate land use and resources. As stated earlier, the supply of land is fixed and must be carefully handled so as to maximise its full potentials.
Zoning helps to ensure that the highest and best use of land and its resources are realized.
There are several reasons why, it is desirable to purchase a piece of property that has strict zoning regulations. Strict zoning laws help maintain property values. Whether you are a landlord or a homeowner, your worst enemy is other landlords and homeowners who allow their homes and neighborhoods to deteriorate. When grass gets overgrown or the neighborhood is scattered with broken windows or junked cars, a good code enforcement officer should help remedy the problem.
Slums that have been created over the years due to ignorance, lack of adequate maintenance have been remedied and transformed into middle class neighborhoods or even gated developments like the society hills condominium units in Newark which replace the projects that used to be there. Zoning really helps to check the excesses of man (rationality). Man in his desire to satisfy himself alone (economic man) could build
a five star hotel opposite Kean University if not for zoning ordinance that will never permit that.
Finally, zoning helps to preserve historical land use and landmarks which defines a people and their heritage. Some developers will care less about in their quest to make money if zoning laws are not in place. Environmental pollution is also kept at its very minimum when industrial layouts are seperated from residential areas. Zoning is also a huge source of revenue for the government.
ESV Gordin Nwako is a registered Estate Surveyor and Valuer. He writes from Abia State, South-East, Nigeria.
