Determinants of restrictive suburban zoning: An empirical analysis

Both theory and observation suggest that three types of incentives are pertinent to suburban zoning decisions. From a legal and economic perspective, the rationale for zoning is to promote the “general welfare” by separating incompatible land uses. Thus, zoning minimizes the negative external effects which some land uses impose on others and serves as a market corrective which promotes an efficient pattern of land development. A number of economists argue, however, that while zoning is often couched in externality terms, it is often a reflection of other objectives which have little, if anything, to do with efficiency criteria…
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.

Barbara Sherman Rolleston

Journal of Urban Economics

January 1987

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