Chapter 9 Zoning and Growth Controls - Urban Economics 6th Edition

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Urban Economics 6th Edition by Arthur O'Sullivan.
This is a brief presentation of Chapter 9. Zoning and Growth Controls with some cases from Indonesia and some other parts of the world.

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Chapter 9 Zoning and Growth Controls - Urban Economics 6th Edition

  1. 1. John William Girsang // Paramita EstihandayaniEkonomi Perkotaan 02.11.2012 CHAPTER 9: ZONING AND GROWTH CONTROLS
  2. 2. Zoning and Growth Controls: Introduction  Does land go to the highest bidder?  Government role in urban land market—maybe not if regulated.  Zoning to separate different land uses into separate zones.  Commercial, industrial, and residential (low and high density)  Growth controls limit population growth  Tax new development (impact fees); limit building permits; limit urban services to selected areas; urban growth boundaries  Who wins and who loses?—what are the trade-offs
  3. 3. The Early History of Zoning  Comprehensive zoning started in 1916 (in New York City and 8 other cities)—and by 1936, zoning had spread to over 1,300 cities.  The basic idea of zoning is to separate land uses that are ‗incompatible‘ in some senses  Innovations in transportation increased the location options for business, setting the stage for industrial zoning.  Truck: replaced horse cart, causing industry to move out of central city to suburbs near residential areas.  Bus: before bus flexibility—low income (high density) households between streetcar spokes; after workers could locate elsewhere.  Zoning to exclude industry and high-density housing?
  4. 4. Zoning as Environmental Policy  Industrial Pollution  Zoning separates residents from pollution  Zoning doesn‘t reduce pollution but moves it around buffer  Economic approach: internalize externality with pollution tax  Retail Externalities: congestion, noise, parking conflicts.  High-density housing: congestion, parking, blocked views  Alternatives: performance standards for traffic, noise, parking views.
  5. 5. Fiscal Zoning  Some communities eagerly host firms that generate fiscal surplus.  Fiscal deficit: tax contribution less than cost of public services.  Minimum lot size zoning (MLS):  Large household in a small dwelling is more likely to generate a fiscal deficit for the local govt.  MLS exploits complementarity of housing and land  As a rule—market value of the property is about 5 times the value of land: v* = 5 • r• s  Target lot size:  v* = target property value; r = price of land/acre; s = lot size (in acres)  Example: s = $200,000 / (5 x $ 80,000) = 0.50 r v s 5 *
  6. 6. Minimum Lot Zoning and the Space Externality  Externality: larger lot generates more space and higher utility for neighbors (i.e. your large lot increases the value of your neighbor‘s house)  External benefit means that privately determined lot sizes are smaller than socially efficient size; people ignore benefits to their neighbors  Externalities cause inefficiencies  MLS: increase space and enforce reciprocity in space decisions
  7. 7. Provision for Open Space  Public land: parks and greenbelts  Restrictions on private land: preservation of farm or forest land—through restrictions on subdivision for residential or commercial uses.  What is the efficient level of open space?  Marginal benefit: marginal cost ( in this case MC=marginal value of the next acre of land)  How does zoning affect the efficiency of the land market? Or should the govt. buy the land?  Pay full cost of the land? Or shift the cost of open space provision to private land owner? deadweight loss
  8. 8. Legitimate exercise of the police power of local government—60 years of legal decisions.  Substantive Due Process  Equal Protection  Just Compensation The Legal Environment of Zoning
  9. 9. Legal Environment: Substantive Due Process  Law must serve legitimate public purpose using reasonable means.  Ambler 1924: Zoning promotes health, safety, morals, and general welfare  No consideration of cost, only benefit  Benefit analysis—can be monetary, physical, spiritual, and aesthetic benefits.  Example: 1880—San Francisco passed laws to explicitly segregate the Chinese; when declared unconstitutional – passed zoning law banning laundries in certain neighborhoods.  Chinese laundries in SF segregated—public welfare.
  10. 10. Legal Environment: Equal Protection  Law must be applied in non-discriminatory fashion  Does exclusionary zoning constitute discrimination?  Euclid: effects of zoning on outsiders unimportant  Los Altos: discrimination on basis of income are legal  State courts adopt more activist role  Mount Laurel (NJ): City accommodates ―fair share‖ of low-income residents  Livermore (CA): consider interests of insiders and outsiders.
  11. 11. Legal Environment: Just Compensation  Should property owners be compensated for losses in value from zoning? Taking clause if govt converts land from private to public use owners should be compensate.  Three Rules to determine if compensation needed: 1. Compensation required for physical invasion (occupation) of land (i.e. not just restricting private use) 2. Harm prevention rule: Compensation not required if zoning promotes public welfare. 3. Diminution of value and reasonable beneficial use  Compensation required if property value drops by sufficiently large amount  No guidance on what‘s large enough  Rule is not widely applied
  12. 12. Houston: City Without Zoning  Land use controlled by voluntary agreements among landowners (covenants) incentive to negotiate restrictions  Coase Theorem—will develop and enforce voluntary agreement (contract) if externalities are large enough and property rights assigned to solve externalities problem  Residential: detailed restrictions on design, appearance, maintenance  Industrial: limit activities How does Houston compare to zoned cities?  Similar distribution of industry and retailers  More strip development along arterial routes  Wide range of densities of apartments  Larger supply of low income (high density) housing (smaller lots)
  13. 13. Houston Land Use - 2008
  14. 14. Growth Control: Urban Growth Boundaries  Policies to restrict the amount of developed land and thus their population.  To simplify matters we will assume that all city residents are renter, and land is owned by the absentee landowners.  1991 survey: One quarter of cities used urban service boundaries to limit their land areas.  Restrict urban services such as roads, water, and sewers to certain areas beyond a certain point
  15. 15. Growth Control: Urban Growth Boundaries Precise Growth Control: Limiting Land Area and Lot Size  Growth control in one city displaces workers to the other city  The immediate effect of the policy is to generate a utility gap between the two cities  Prices adjust to generate locational equilibrium (the first axiom of urban economics).  Each uncontrolled city would experience a smaller increase in its workforce and thus a smaller decrease in utility. Jakarta Urban Growth (1976 – 1989 – 2004) Source: http://earthobservatory.nasa.gov/
  16. 16. Growth Control: Urban Growth Boundaries  Growth Control Policy, decreases the utility of workers throughout the region  The workers in the uncontrolled city lose, because their city grows, moving further downward along the negatively sloped utility curve.  Obviously, landowners who owned land just outside the boundaries are losers, and in contrast, people who owned land inside the boundary are winners
  17. 17. Urban Growth Boundary and Density  Suppose the city uses a growth boundary, but does not restrict lot size  As before, The utility gap increase the price of land in the control city.  A growth boundary is a blunt tool to deal with distortion for 2 reasons:  Although a growth boundary may change density in the correct direction, it may go too far or not far enough  A growth boundary creates distortions of its own
  18. 18. Portland’s Urban Growth Boundary  Portland growth boundary differ from the growth- boundary policy we have discussed, The Portland boundary is extended at the population of the metropolitan increases.  The boundary is combined with a number of policies that promote rather than inhibit increases in density.  In other words, the growth boundary is an integral part of urban planning, the set of policies that determine the spatial arrangement of activities in metropolitan
  19. 19. Municipal vs. Metropolitan Growth Boundaries  The basic logic of growth boundaries doesn’t change with the level of geography.  There are two difference between a municipal and metropolitan boundary:  People are more mobile between municipalities than between metropolitan areas.  Some of the people displaced by a municipal boundary will relocate to other municipalities in the same metropolitan area
  20. 20. Trade- Offs with Growth Boundaries and Open Space  How does a growth boundary affect homeowners?  How do the benefits of growth compare to the cost?  The trade-off is that the limited supply of developable land leads to higher prices and higher density--less private space  The authors conclude that a modest relaxation of the open space and boundary policies of Reading, England would generate a net gain of $384 per household per year, about 2% of annual income. Sourcce: http://www.sightline.org Seattle Area Growth Boundary 1991-2001
  21. 21. Other Growth—Control Policies  Limiting Building Permits:  Like growth boundary, a limit on building permits displaces households from one city to another.  Development Fees  Although a growth boundary may change density in the correct direction, it may go too far or not far enough  A growth boundary creates distortions of its own
  22. 22. SUMMARY 1. Zoning is a blunt policy to control pollution because it just move the pollution around. An alternative policy is to combine pollution taxes with zoning 2. Local government can use minimum lot-size zoning to exclude land user who would generate a fiscal deficit – paying less in taxes than they get in public services 3. The use of zoning to provide open space generates excessive amount of open space because voters don‘t bear the full cost of the public good 4. In two-city region, an urban growth boundary in one city decreases utility in both cities and increases land rent in the city with boundary 5. A limit of building permits increases the equilibrium price housing and decreases the price of vacant land.
  23. 23. Sekian dan Terima Kasih © 02.11.12

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