Political Structure and Exclusionary Zoning: Are Small Suburbs the Big Problem?

Metropolitan areas with more fragmented government structures—many small suburbs—are more likely to have stringent development restrictions, which reduce the elasticity of supply of housing, than are other metropolitan areas. MSAs whose local government structure is characterized by fewer and larger local governments respond to increased demand for housing with larger amounts of housing, not just increased prices. The chief reason is that in larger jurisdictions developers can bring more political clout and homeowners have a more difficult time organizing. MSAs whose land use is controlled by very few jurisdictions, however, appear to be subject to the monopoly zoning effect. Even if antidevelopment forces do not consciously think that they are promoting a monopoly, the extra boost to the value of already-established homes makes it more likely that homeowners will overcome the free rider problems of political participation in large jurisdictions. The other qualification to this account is that the courts can make a difference, as can be suggested here by a negative example. Prior to 1970, California was not an expensive place to live. During the 1970s, California’s housing prices shot up to a permanently high plateau, higher than almost anywhere else in the country. How much of that can be attributed to the judicial downgrading of developers’ rights cannot easily be estimated, but it is difficult to ignore the role of the courts in making California a much more costly place to live.

William A. Fischel

Fiscal Decentralization and Land Policies

2008

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