How land use regulations are zoning out low-income families

Social mobility and geographical mobility have historically gone hand-in-hand in America: people move to places with greater opportunity. But such moves have become steadily more difficult, in part because of the growing regulation of land use. Zoning ordinances that limit density are a particular problem, reducing the availability of affordable housing.

The rise of land use regulation

The number of court cases mentioning “land use” (an innovative measure of regulation used in a Hutchins Center working paper by Peter Ganong and Daniel Shoag) has risen steadily:

Nobody, including the authors, thinks that this is a perfect measure—although it does correlate well with other common benchmarks, like the Wharton Index of Regulation and the measure produced by the American Institute of Planners. Ganong and Shoag show that the movement of less-skilled workers to higher-growth areas has not risen in recent years, a break with the historical pattern:

Why? Regulation seems to be a big part of the answer. The Hutchins paper complements earlier economic analyses, including a study published last year by Chang-Tai Hsieh and Enrico Moretti which estimates that the U.S. economy is 14 percent smaller as a result of constraints on housing development.

Zoning as a class barrier

Zoning also exacerbates inequality. As Jason Furman, chairman of the CEA puts it:

“While land use regulations sometimes serve reasonable and legitimate purposes, they can also give extra-normal returns to entrenched interests at the expense of everyone else…Zoning regulations and other local barriers to housing development [can] allow a small number of individuals to capture the economic benefits of living in a community, thus limiting diversity and mobility.”

By using local government powers to zone out lower-income families, upper middle class Americans protect the value of their homes. (Federal policy helps, of course, by regressively supporting richer home owners through mortgage interest deductions.)

Zoning and educational inequality

NIMBYism is motivated by a rational desire to accumulate financial capital by enhancing home values. But for parents, it is also about helping their children accumulate human capital by controlling access to local schools. According to Jonathan Rothwell, there is a strong link between zoning and educational disparities. Homes near good elementary schools are more expensive: about two and half times as much as those near the poorer-performing schools. But in metropolitan areas with more restrictive zoning, this gap is even wider. Loosening zoning regulations would reduce the housing cost gap and therefore narrow the school test-score gap by 4 to 7 percentiles, Rothwell finds.

Zoning is one form of “opportunity hoarding” that sharpens the divisions between ordinary and upper middle class Americans (a theme I develop in my forthcoming book, Dream Hoarders). There are hopeful signs that state legislators are waking up to this problem. Two separate bills in the Massachusetts state legislature, for example, would have required towns to create more multi-family zoning districts, though both died in the session that ended this July. Given the powerful vested interests involved in exclusionary zoning, reform will require some serious political determination.