Zoning Paper
Nathan Durden
Econ 420
Dr. Herbener
3 December 2013
Box #1461
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Introduction
Few economic issues have such a widespread effect on people and are on people’s minds
as much as housing. Our recent economic crisis, largely caused by the mortgage crisis,
only makes the importance of housing clearer and more pertinent. In American society,
many conflicts arise over how much the government must do in order to ensure that
housing needs are met and who should bear the financial and social costs of meeting
those needs. Urban planning, zoning and land use regulations are core aspects of the
housing puzzle. Originally designed to reduce “nuisances”, the purposes of zoning have
been expanded to include preserving neighborhood character, making housing affordable
and reducing externalities caused by incompatible land uses. In part, zoning has gone
from its original goal of serving “public” interests to serving private interests, by
allowing “NIMBY” homeowners to restrict the housing supply to their own benefit at the
expense of any potential new neighbors, whose presence might create nuisances or lower
their property values.1
Although zoning has been in existence in the United States since 1916 (New York
City) and has been applied throughout the country, many scholars have criticized zoning
for being inflexible, detrimental to development, being susceptible to special interests,
and failing in its stated purposes (Fraietta, 2013, p. 1927). Other institutional
arrangements have arisen that call into question the validity of zoning as an effective and
justified regulatory measure. Zoning regulations fail to adequately address the housing
problems that they were created to solve, and a more voluntary contractual approach can
better address issues of housing supply, price, and responsiveness to the needs of
individuals.
1
NIMBY is an ackronym for “not in my backyard.”
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Overview of Zoning
Zoning did not arise in a vacuum. It was created to address problems that
lawmakers and the public saw as requiring a regulatory intervention in order to
adequately address the problems. In the case of New York City’s precedent-creating law,
the Zoning Resolution of 1916, the problem lawmakers sought to mitigate was the loss of
light and air caused by the ever-increasing heights of the new skyscrapers being built.
Nuisance doctrine failed to adequately deal with this problem, so the Zoning Resolution
was established to regulate where buildings could be built and how tall and how far setback the buildings could be. Some residential areas were excluded from certain
incompatible land uses (Fraietta, 2013, p. 1927). Through zoning, governments can
designate certain zones for particular land uses. In this way, cities can reduce nuisances
administratively, rather than through litigation, as it was previously accomplished
(Schleicher, 2013, p. 1681). Reducing externalities relating to nuisances provided the
original justification for the expansion of zoning regulations, but zoning has since been
used to address other perceived problems. These problems include negative externalities
related to incompatible land uses, erratic development caused by market forces and
speculative cycles, and protecting “neighborhood character” (Mark and Goldberg, 1981,
p. 419).
Of recent years, two major purposes to maintain and make zoning stricter is the
desire to preserve neighborhood character of existing communities and to deal with a
perceived affordability crisis. Proponents of zoning and land use regulation see it as an
effective method to protect existing communities by slowing the pace of new
development or alteration of existing properties. Additionally, the government has the
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ability to seek community objectives of cohesion and stability, while determining what
the best uses of land will be, balancing economic efficiency and other important but less
objectively-defined goals (Steele, 1986, pp. 710-711). When the rules of zoning are welldefined, uniform and predictable, proponents argue, economic investment is not overly
hampered by the regulations.
As a function primarily of municipal government, zoning is open to public
participation through elections and the political process. To a greater degree, citizens
(primarily homeowners) have a greater participation in the politics of zoning than they do
in other areas of government. Particularly in urban areas with rapid population growth,
zoning can allow for the municipal government to maintain the “character of the
community” and separate the city into zones outlined for residential, commercial, and
industrial uses which are seen as incompatible in close proximity. Zoning acts as a tool
for fulfilling a city’s comprehensive growth plan. Zoning is primarily a concern of
municipal government, and with the municipal government, the decision-making is
typically performed by appointed commissions or boards which answer to the city
council. Consistent with the scientific management endorsed by the Progressive
Movement, cities evolve better if they follow a plan created by experts. Through zoning,
the status quo can be maintained by those with the political control (Steele, p. 714).
Economic Theory of Zoning
The economic theory of zoning, like the theory applied to other aspects of the
housing market, is fairly straightforward. By creating barriers to development, zoning
restricts supply from what it would otherwise be absent the zoning. The decreased
supply cannot meet the demand for housing, which creates an excess demand. As in
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other cases of excess demand, the price of housing rises until equilibrium is reached.
Because of the artificially high prices, owners of undeveloped land and future
homebuyers are harmed, while those currently owning homes in the zoned areas benefit
in the form of higher property values (Ellickson, 1977, p. 395). As William Fischel
states,
The problem is that local zoning allocates too little land for all uses, including
housing. This withdrawal of land from available supply, and the difficulty of
getting it back into play, causes housing prices everywhere to be too high and
probably causes excessive metropolitan decentralization (1987, pp. 269-270).
Construction is an industry with relatively few barriers to entry and the price of housing,
absent widespread controls, is relatively close to the marginal, physical costs of
construction. Only in a few areas is the price of housing noticeably higher than the costs
of construction. In areas in which the price of housing is significantly higher than the
marginal construction costs, such as California, zoning and land use regulations play a
disproportionately large role (Glaeser and Gyourko, 2002, Intro).
Edward Glaeser and Gyourko, in a study of the relationship between zoning,
housing costs, and other housing factors, determined that what is perceived as a housing
affordability crisis is largely due to zoning regulations, which limit the extent of
construction, creating a wedge between production costs and prices (2002). Typically,
when there is excess demand for a good, the price of the good is bid up, encouraging an
increase in supply which will meet the demand. When regulations prohibit the
introduction of additional supply even though the good (in this case, housing) is
demanded, prices remain high.
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Inclusionary Zoning and Bay Area
One popular method of dealing with the perceived housing affordability crisis in
dense urban areas is to introduce inclusionary zoning ordinances. This form of zoning
has been particularly popular in California, where ten percent of cities with populations
over 100,000 and twenty percent of all California communities have inclusionary zoning
ordinances (Powell and Stringham, 2004, p. 1). Inclusionary zoning is created to
improve housing affordability by imposing price controls on a percentage of new homes
being built. The San Francisco Bay area, in particular, has high levels of inclusionary
zoning; more than fifty jurisdictions in the area have it. Due to the region’s varying
levels of demographics and income levels, it serves as an optimal sample for what
inclusionary zoning’s impact would be nationwide (Powell and Stringham).
Inclusionary zoning in the San Francisco Bay area provides ample evidence that it
does not accomplish the goals for which it was instituted. The desire for affordable
housing in California, and the Bay area in particular, is perfectly understandable: eight of
the ten least affordable metropolitan areas in the nation are in California, with San
Francisco and San Jose ranked the least and second-least affordable (Powell and
Stringham). Rather than providing adequate levels of affordable housing, however,
inclusionary zoning results in few affordable housing units, high costs, reduced overall
supply of new homes, and reduced government revenue. Since 1973, an average of only
228 “affordable” units has been built each year among the fifty Bay Area cities. This
actual construction is far below the 24,217 projection made by the Association of Bay
Area Governments, an outcome which is not particularly surprising (Powell and
Stringham, p. 5). By setting price ceilings on a good below the market price, economic
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theory informs us that the supply of that good will be restricted. Builders who might
want to build in a particular area will seek other opportunities when inclusionary zoning
restricts their ability to profit. Even when inclusionary units are built, it has adverse
effects on housing affordability.
The costs introduced by inclusionary zoning must be borne by someone, and
builders will typically seek to pass this cost on to the homebuyers of new market-rate
houses, in order to avoid taking a loss. Additionally, the increased cost discourages
developers from building in inclusionary zones, leading to a decrease in supply, which
also acts to increase the price of housing in those jurisdictions. As Stringham and Powell
explain, “on average, new construction fell by 31 percent in the year following the
adoption of the inclusionary zoning ordinance (p. 20).” This effect seems to illustrate the
inverse relationship between regulation (specifically price controls) and housing supply.
In order for development in a price-controlled city to be profitable enough to
attract builders, one of two things has to happen. Either market-rate home prices
must increase, or land prices must decrease to compensate the builder for his
losses due to price controls. Even with price controls on a portion of development,
builders can still earn the normal rate of return if other home prices increase or
land prices decrease. The likely result will be some combination of the two
(Powell and Stringham, p. 16).
Rather than imposing price controls on housing, lawmakers concerned about the ability
of low- and middle-income people to afford housing should ease the regulatory burden on
developers, better enabling them to meet the increase in demand for housing. “Supply
matters” (Landis, Elmer and Zook, 2002, p. 269). The more quickly the supply of
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housing can be created in response to the increased demand for housing, the more
affordable housing will be. When supply is restricted and the median house price rises, it
is the lower-income individuals who end up priced out of the market, which is the
opposite of what most proponents of zoning purport to want.
Public Choice of Zoning
An important aspect of zoning is the political forces that lead to its creation and
stabilization. A public choice study of zoning is essential for any analytical overview of
the regulation. Much of the economics profession has come to a general consensus on
the reality that increased regulations in the housing market tends to lead to a decrease in
supply of housing, which will result in a higher median price for housing. Despite an
intellectual environment which views zoning less favorably than it once did, zoning
restrictions have tended to become stricter (Scleicher, p. 1674). The reason for this can
be found in public choice analysis of zoning.
The political economy of zoning is largely framed by the culture and procedural
nature of municipal government. Political representation in municipal government is
different from representation at the national level in a number of ways. Many counties
and municipalities have nonpartisan elections, and those that do have partisan elections
are frequently dominated by one party, essentially making that one party the only relevant
arena within which there is political competition (Schleicher, p. 1699). Additionally,
voters, who tend to be uninformed, typically use national parties as signifiers of
information by which they can choose a candidate who most closely represents their
positions.
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Local elections lack these critical indicators, due to the aforementioned difference
in party competition. Local political issues also frequently have little relation with
national issues. Local elections typically have low turnouts and local offices tend to have
little turnover. These factors combine to produce a situation in which local politicians, in
a practical sense, frequently do not have to be very responsive to the electorate. In
nonpartisan or governmental bodies that lack party competition, “universal logrolling” is
one method by which the participants reach agreements. Sometimes referred to as
“councilmanic courtesy,” all members of the city council agree to approve of the decision
made by the member representing the district in which the issue has appeared (Ellickson,
1977, p. 408). As a result, members exercise a great deal of control over their respective
districts, which is a factor particularly relevant to zoning.
Zoning has become stricter over time, largely due to the procedural rules that
distort the results against gradual increases in the housing supply. The Standard State
Zoning Enabling Act (SZEA), promoted by the Hoover administration in the 1920s, is the
most applied act for zoning procedure and thus, the most influential in how the zoning
process works (Fraietta, p. 1926). Zoning is primarily changed through revision of
zoning maps, which specify the land uses appropriate in specific areas, and
variances/exceptions. Map revisions must receive a recommendation by the zoning
commission (appointed) before it can go through the regular legislative process. A
separate board, the board of zoning appeals, has the ability to grant variances or
exceptions for specific plots; but none of its decisions exert a larger influence or
precedence (Schleicher, p. 1706).
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These two procedures are difficult enough to navigate, but some states (such as
New York and California) have even required environmental impact statements as an
additional condition or hurdle for approval of any new development projects. Other
barriers to development frequently include historic preservation laws, which prevent any
development from occurring in “historic developments” and community boards, which
can issue nonbinding recommendations that can influence the legislator representing that
district. Projects opposed by community boards are rarely approved (Pecorella, 1989, p.
104).
In addition to the procedural challenges inherent in the zoning process, the
relationships of the participants to zoning further biases zoning towards strictness. The
participants, not including the aforementioned legislature, are primarily developers and
consumers, who favor increased development, on the one side, and risk-averse neighbors,
who tend to oppose more development, on the other side. There is an imbalance in the
costs/benefits to each side. Because new development has the biggest impact on current
homeowners, who as a group are more established, organized, and politically involved
than either developers, who may have some political clout or organization as a group, and
future or potential homebuyers, who have essentially no political clout or organization,
the current homebuyers typically are able to get what they want, which is no new
development. Much of development is performed by small home builders who provide
incremental increases in housing, rather than large, immediate projects. Due to zoning
restrictions, smaller projects are often the only feasible option (Heller and Hills, 2008, p.
1473).
Alternative Arrangements
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Whenever one identifies a legal or institutional arrangement that may be
problematic or fails to meet it purported goals, one must ask what alternative would be
more effective. As I have indicated that zoning is not entirely effective in accomplishing
the goals for which it was instituted, I will describe two arrangements that largely address
similar problems, but may do so more efficiently. The first arrangement is covenants. I
will describe a case study of Victorian England which illustrates the ability of covenants
to address the problems of zoning. The second arrangement is neighborhood associations;
These are perhaps more understood, as the neighborhood association is a common
institution in contemporary America.
In the mid-1800s, England became the first urbanized society in the world. From
1801 to 1851, England’s population doubled, reaching 20.81 million. By 1861, 38.2
percent of the population lived in cities larger than 20,000 (Davies, 2002, p. 18).
Obviously, such a great increase (and migration) of population will result in a dramatic
increase in the demand for housing in urban areas. Such rapid change could have easily
resulted in an acute housing crisis; however, it did not. The housing demand was met by
an increased supply, and towns grew to meet the needs of the population. This rapid
housing expansion was accomplished without any apparent zoning laws, public building
projects, or planning bodies, but rather through entrepreneurial activity within a market
directed by well-defined property rights and private contracts. It was not “planned” in
the sense that government directed the production, but it was orderly and planned by
individuals. As Thomas Sowell reminds us,
Every economic activity under every conceivable form of society has been
planned. What differs are the decision making units that do the planning. . . . .
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What is politically defined as economic “planning” is the forcible superseding of
other people’s plans by government officials (Sowell, 1980, pp. 213-214).
Improved transportation due to turnpikes and canals, increased agricultural productivity
due to technological advancement, and the increase in demand for housing resulted in
increased land values. As agricultural productivity improved, more people could live and
work in the industrializing urban areas, and transportation improvements enabled people
to live further from work than they had previously been capable. The increased land
values encouraged landowners to develop their land. Frequently, the development was
conducted by a speculator (Davies, p. 19).
During this period, land transfers were almost always accomplished through
covenants. In the 1770s, covenants were unusual. By the early 1800s, however, they
were nearly universal in England. In this case, land-transfer contracts contained specific
stipulations (covenants), which if not followed, rendered the transfer invalid (Davies, p.
33). By conditioning the transaction with these legally binding stipulations, the use of the
land was relatively controlled and “planned.”
The nature of covenants was incredibly diverse, but the most common stipulation
was the building clause, which was a 99-year lease by which the person leasing the
property was bound to construct a building or buildings of specified type with a given
period of time (Davies). Covenants also frequently outlined the minimum amount of
money to be spent in building. Other requirements or specifications of covenants were
wide-ranging and included specifications on the type of building and the use made of any
buildings; the type(s) of materials to be used, thickness of walls, roofing quality,
placement of windows; requirements for the developer to pave streets, build sidewalks,
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provide lighting, and in some large industrial cities, like Birmingham, even
environmental stipulations (Davies).
When the land began being developed, housing was not the only good produced
by the landlord/speculators. Infrastructure was both expected and provided. Usually a
minimum level of “public goods” provided would include paved streets, a drainage
system, and street lighting. By providing these goods, land was more desirable and a
higher rent could be charged to residents. Smaller builders, in particular, would be
disinclined to build where these goods were not already provided. Streets were not only
provided, but the layout was developed in a way as to enhance the natural advantages of
the site. Larger estates would follow a grid pattern, and geographical features were taken
into account (Davies, p. 25)
The “strictness” of covenants was flexible and frequently driven by market
demand. It was understood that there are frequently tradeoffs between size, quality,
price, density, location, and level of services provided, and these considerations
informed the planners as they determined how strict to make the covenants (Davie, p.
35). Stricter covenants would commonly be created for more upscale, exclusive areas,
whereas housing for the lower-income would typically follow a more general covenant.
Stricter covenants would increase the price of rent, which if it was too high, the property
would not sell. The covenant system was flexible and market-driven, meaning it could be
tailored to the needs and wants of the consumer.
The covenant system has been criticized as an anti-market institution which
involves planning just like state planning. Covenants were not anti-market, however, but
acted as a market institution which brought together the landlord, developer, builder, and
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consumer. Rather than restrict development, covenants enabled landlords or developers
to sell to the ultimate consumer a “quality, appearance, environment, and services”
(Davies, p. 34). Covenants provided a particular use in mitigating two collective-action
problems: the prisoner’s dilemma and the public goods problem. The prisoner’s dilemma
problem had to do with the quality of property. There existed an incentive for builders
and owners to allow property to decay or just build cheaper buildings, while assuming
that their neighbors acted similarly. Covenants, however, imposed a “common,
enforceable duty”, which prevented this neglect from occurring (Davies). The public
goods problem deals with the non-excludable nature of public goods; everyone can
benefit even if they do not pay for them. Through covenants, these public goods were
bundled with the land, thus circumventing the free-rider problem.
Upon being informed of the covenant system that existed during nineteenthcentury England, many observers will justifiably ask, “What does the covenant system
have to do with us?” Without a close examination, it would appear that the manner in
which housing was developed and laid out in England a couple centuries ago would have
little meaning for contemporary scholars of planning. I contend, however, that this case
study can illustrate several important principles for our current zoning situation in
America. First, it demonstrates how “planning” need not be entirely the province of
government, but is and can be performed by individuals and through private
relationships, resulting in (spontaneous) order.2 Although somewhat tangential, the
covenant arrangement can even demonstrate the ability of private, contractual
2
For a further discussion of spontaneous order, see Friedrich A. Hayek, The Fatal Conceit: The Errors of
Socialism (Chicago: University of Chicago Press, 1988).
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relationships to handle collective-action problems that are frequently considered to be the
exclusive domain of local government.3
The housing situation in Victorian England also teaches us that housing supply,
particularly in urban areas, can be met without any sort of government regulatory body or
commission centrally directing production. England witnessed the world’s first
widespread urbanization, and during this period, no public action was taken to provide
housing or common services, but a sufficient supply of housing was built. The housing
supply was sufficient, and although covenants acted as a regulatory apparatus, increasing
costs for builders and homebuyers, as does any regulatory apparatus, the effect was not so
significant as to price many buyers out of the housing market. As Sir Frederick Osborn, a
member of the Garden City movement, described the period,
the unregulated market system "provided more middle class housing than the
middle class could absorb an a supply of working class housing that, it of minimal
standards of amenity, was in most cases adequate for the needs of the people, at a
price that the great majority of the working classes could afford (Davies, p. 38).
This is not to say that covenants created a perfect housing situation that solved all urban
problems. But when examining different institutional arrangements, it is important to
avoid the nirvana fallacy, or the fallacy of comparing an existing, imperfect institutional
arrangement with a perfect, ideal situation which cannot be realized. Instead, it is
important to compare the records of real institutional arrangements, which always involve
some form of tradeoffs (Demsetz, 1969, p. 1). Finally, covenants provide a sort of
3
For a further study of the ability of public goods to be provided through private, voluntary means, see
Daniel Klein, “The Voluntary Provision of Public Goods? The Turnpike Companies of Early America” in
The Voluntary City: Choice, Community, and Civil Society (Oakland: Independent Institute, 2002), 76-101.
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intellectual bridge to a current and increasingly popular private method of planning
housing development, that of the neighborhood association.
The formation of neighborhood associations is an alternative to zoning frequently
employed in contemporary America. Since the 1960s, neighborhood associations have
expanded rapidly across the United States; since the 1970s, the percentage of the U.S.
population that lives in neighborhood associations has increased from one percent to 18
percent (Nelson, 2009, p. 343). Neighborhood associations have become perhaps the
most influential example of public goods being brought under the direction of private
market forces.
In the late twentieth-century, new economic forces brought a transformation in
private property ownership, including higher densities of development, increased desire
for precise control over neighborhood character, more economical private provision of
common neighborhood services, and greater interest in common recreational and other
facilities. Altogether, these forces contributed to the spread of collective private property
ownership of housing. Almost all neighborhood associations have arisen as part of the
development of new neighborhoods (Nelson, p. 344). In fact, in many areas (particularly
Sunbelt states such as Nevada, Florida, and Arizona), the neighborhood association has
become the primary way of regulating new housing development. In the 50 largest
metropolitan areas, more than half of new housing was built in areas with neighborhood
associations (Nelson, 2002, p. 309). Beginning in the 1970s and 1980s, a wave of local
government financial crises opened the door for neighborhood associations to increase in
influence, as they became responsible for the common services which the municipalities
could no longer afford. In some places, the creation of a neighborhood association is a
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condition for approval of development. Private communities have become seen as “cash
cows,” as the residents pay property taxes but don’t require government-supplied services
(McKenzie, 2011, p. x).
Although there are three primary kinds of neighborhood associations:
condominium, cooperatives, and homeowner associations, I will address primarily
homeowner associations. In a typical planned unit development (PUD) homeowner
association, each homeowner holds title to the house and the yard, while the association
holds title to the streets, parks, neighborhood common buildings, and other common
areas (Nelson, 2005, p. 29). Like a municipal government, homeowner associations have
regulatory control over the properties within the association boundaries. This control
includes the ability to levy assessments, or “tax,” the residents in order to pay for the
costs of the association. When an individual chooses to move into a home that is part of
a homeowner association, that individual is required to agree to the association’s terms of
governance, which are explained in the “CC&Rs”: covenants, conditions, and restrictions
(Nelson, 2005, p. 343). In a sense, home buyers in these neighborhoods “buy” the
neighborhood constitution in addition to their home.
Because the association has assumed the regulatory control that would otherwise
be held by a municipal government, it also is responsible for the public services, which
include garbage collection, street lighting, street maintenance, and sometimes other
services like snow removal. Common areas, such as parks, are maintained by the
association, as well. Private security within a gated community is a frequently provided
common service that is highly desirable to many potential homebuyers, and often
perceived as more effective than general police protection.
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Most neighborhood associations are nonprofit corporations, governed by a board
of directors and resembling a business corporation in many ways, except with the unusual
power to tax its “shareholders” (Nelson, 2005, p. 368). This arrangement is a return
largely to what had existed 200 years ago in England and the United States. The voting
methods differ to some degree from association to association, but they frequently follow
a shareholder method of voting, which would be considered unconstitutional for a
municipal government to allow.4 The two main functions of homeowner associations are
to protect and increase the value of the homes. Homeowner associations, acting in some
ways similar to zoning, but arising out of private relationships, are better able to meet the
desires which lead to zoning, than zoning can.
Neighborhood associations are an institutional innovation that provides many
beneficial features that many consumers seek in their communities. These features
include more restrictions on the neighborhood environment, efficient and reliable
common services, and greater participation in and control over collective decisionmaking. In terms of its transformative power, Robert H. Nelson analogized the
homeowner association to the modern business corporation, which revolutionized
economic life (Nelson, 2009, p. 351). One aspect of neighborhood associations with
which a zoning regime cannot compare with is their ability to handle “incompatible” use
issues through monetary means. A common aspect of homeowner associations is the
ability to sell entry into the neighborhood to, say, a gas station or a grocery store. In
many instances, homeowner associations will negotiate with a potential corporate entity
or developer, and then the residents would be able to vote whether or not to accept the
deal. Revenue from the sale can even be distributed to all the residents, which also helps
4
See Supreme Court case: Reynolds v. Sims, 377 U.S. 533 (1964).
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to compensate for potential externalities created by the entry of the store (Nelson, 2009,
p. 349). By introducing monetary compensation for resolving externalities, legal and
administrative measures to negate nuisances are no longer as necessary. This minimizes
the wasted resources used to resolve the conflict, and results in an optimal resource
allocation (Ellickson, 1973, p. 689). Selling entry in this manner is something a
municipality typically cannot do. Zoning takes development rights from land owners to
the municipality; zoning is almost an “invitation to bribery” (Nelson 2002, 327).5 The
homeowner association restores development rights to the homeowner, albeit in a
collective sense. The ability of the homeowner association to negotiate with a developer
or corporate entity can make the negotiations more efficient and responsive to the
residents of the community.
Neighborhood associations, although having many desirable features, also have
some less attractive aspects to them. In some cases, homeowner associations will result
in less personal freedom, which some contend makes them antithetical to consumer
choice or to individualism, which are stated goals for many proponents of neighborhood
associations. These restrictions can include guidelines on how one can remodel their
property, bans on political signs, and restrictions on other forms of demonstration, such
as parades and protests. In a zoning regime, restrictions on protests and political signs,
etc. cannot exist due to the unconstitutionality of restricting acts of free speech. James
Buchanan, however, clarified this issue when he stated that
Individuals are the ultimate sovereigns in matters of social organization, that
individuals are the beings who are entitled to choose the organizationalinstitutional structures under which they live . . . legitimacy [of organizational
5
See also: Balk, Alfred. “Invitation to Bribery.” Harper’s Magazine (October 1966): 18.
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structures] must also be extended to “choice restricting” institutions so long as the
participating individuals voluntarily choose to live under such regimes
(Buchanan, 1999, p. 288).
Buchanan’s analysis provides some intellectual weight to the acceptability of these
actions taken by neighborhood associations, but it presents a concern, especially for those
seeking to increase the realm of individual freedom.
Other potential issues with neighborhood associations include the claims that they
create “civic secession”, polarization, and reduce empathy between those who live in
these private communities and those living in municipalities (Cashin, 2001, 1677).6 The
strongest critics have even likened neighborhood associations to totalitarian regimes and
their proponents as believers in a “utopian faith” (Bowler and McKenzie, 1985, p. 55).
On the whole, however, neighborhood associations provide a fresh alternative to strict,
inflexible, zoning regimes, giving consumers the option of a collective private ownership
that enables for more efficient, better provision of common services and housing quality
in one final package.
Conclusion
Each of the three institutional arrangements I have described, zoning, covenants, and
neighborhood associations, include a level of planning and some level of restriction on
the freedom of choice of the individual. The primary difference among the three
arrangements is in who is doing the planning and how the individual is restricted.
Through zoning, the planners are municipal legislatures and planning commissions. In
the case of covenants and neighborhood associations, the planners are, to a much greater
See also: Sheryll D. Cashin, “Localism, Self-Interest, and the Tyranny of the Favored Quarter: Addressing
the Barriers to New Regionalism,” Georgetown Law Journal 88 (July 2000): 1987; and Richard Louv,
America II (New York: Penguin Books, 1985): xx.
6
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degree, the landowners and consumers who are closer to the situation and will have more
of a first-hand effect from the land. The latter two institutions provide much of the
societal goods that zoning intends to create, in terms of the ability to maintain
“neighborhood character,” provide public goods, and ensure a minimum quality and
nuisance redress. In addition, the alternatives to zoning bring to the table, is a greater
flexibility and responsiveness to what those who actually have to live in a neighborhood
want or think is best, as well as improved efficiency, a better “bang for the buck.” As
mentioned earlier, when considering which of the three options provides the superlative
benefit, one must avoid the nirvana fallacy. There are tradeoffs with any institutional
arrangement, and it is necessary to use comparative institutional analysis carefully,
comparing real institutional arrangements, rather than comparing a real institutional
arrangement with an unrealizable ideal.
So in determining which kind of institution is desirable for a thriving society, it is
important to look for what will best mitigate collective-action problems and nuisance
issues, without harming individuals’ ability to act. Although economics is typically seen
as a “value-free” discipline, decisions like these frequently come down to the normative
beliefs of the relevant actors (Rothbard, 1997, p. 23). Those who favor spontaneous
order, dispersed information, and favor voluntary contracts and a greater individualism
will tend to see zoning as detrimental to society and likely worthy of, if not outright
removal7, at least a large-scale pull-back. Those who favor collective action and believe
For a discussion of a total absence of zoning, see: Bernard H. Siegan, “Non-Zoning in Houston” and Land
Use Without Zoning; and Michael Lewyn, How Overregulation Creates Sprawl (Even in a City Without
Zoning), 50 WAYNE L. REV. 1171, 1177-94, 1199-1204 (2004).
7
Durden 22
it necessary for experts or planners to make decision for society, likely will not change
their minds about the purported virtues of zoning.
Durden 23
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