This research provides evidence that fiscal considerations are important determinants of restrictive residential zoning. Suburban communities appear to be concerned over the cost-revenue implications of new residential development. The results suggest that communities encourage residential uses which, given local tax base composition, at least break even fiscally and thus pay for themselves. Furthermore, in highly fragmented metropolitan regions, communities with fiscal superiority over their neighbors appear to use zoning to preserve their relative fiscal advantage. Zoning thus offers communities a means to compete for net fiscal gains in the context of geographically bounded metropolitan regions.
Journal of Urban Economics