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DOI: 10.1080/0042098032000165271

2004 41: 317Urban StudWilliam A. Fischel

An Economic History of Zoning and a Cure for its Exclusionary Effects

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Urban Studies, Vol. 41, No. 2, 317–340, February 2004

An Economic History of Zoning and a Cure for itsExclusionary Effects

William A.FischelDepartment of EconomicsDartmouth College6106 Rockefeller HallHanoverNH 03755NHUSA603 646 [email protected]

William A. Fischel

[Paper first received, January 2002; in final form, January 2003]

Summary. The paper outlines the 20th-century history of American zoning to explain howhome-owners came to dominate its content and administration in most jurisdictions. Zoning’soriginal purpose was to protect home-owners in residential areas from devaluation by industrialand apartment uses that had been made footloose by trucks and buses around 1910–20.Completion of the interstate highway system around 1970 made jobs and employees so mobilethat suburbs adopted growth controls to stem the tide. If zoning is indeed a substitute forhome-value insurance, it seems worthwhile to investigate the possibility of home-equity insuranceto reduce the demand for exclusionary zoning.

Introduction

This essay offers an economic explanationfor the origins of American zoning, its biastowards home-ownership and its 20th-cen-tury evolution. There are three major puzzlesto be explained. First, why did zoning takethe country by storm in the 1910–30 erarather than before? Secondly, why do zoninglaws prefer the owner-occupied, single-fam-ily home to other land uses? Thirdly, why didzoning start to have extraterritorial effects onmetropolitan housing prices only after about1970?

The purpose of this historical enquiry is tooffer a test of the thesis of my book, TheHomevoter Hypothesis (Fischel, 2001a). Itscentral idea is that the way to understandlocal government behaviour is to see itthrough the eyes of home-owners—and notrenters, developers, business interests, or ma-chine politicians—who are resident in the

community. Home-owners have a special in-terest in their community that helps over-come the free-rider problem in public affairs.For most of them, home is by far their largestfinancial asset and, unlike owners of corpo-rate stock, home-owners cannot diversifytheir holdings among several communities.Fear of a capital loss to their major asset anddesire to increase its value motivate ownersof homes to become ‘homevoters’. They votetheir homes in local elections and at publichearings.

The dominance of home-owners and theirtouchiness about their main asset explainwhy nearly every suburban zoning ordinanceputs the single-family, owner-occupied homeat the pinnacle of uses to be protected. Thehomevoter approach to local government canalso explain why zoning came into beingwhen it did (1910–20) and why during the

William A. Fischel is in the Department of Economics, Dartmouth College, 6106 Rockefeller Hall, Hanover, NH 03755, USA. Fax:603 646 2122. E-mail: [email protected]. This paper was presented at the Florida State University Critical IssuesSymposium: The Causes and Consequences of Exclusionary Regulations, November 2001. The author would like to thank BruceBenson for his comments at the conference and also Raphael Fischler and Tom Daniels at the ACSP meetings in Baltimore,November 2002, for their comments.

0042-0980 Print/1360-063X On-line/04/020317–24 2004 The Editors of Urban StudiesDOI: 10.1080/0042098032000165271



WILLIAM A. FISCHEL318

1970s it became more generally exclusion-ary. New transport technologies, specificallythe bus and truck in the 1910s and the devel-opment of the interstate highway system inthe 1960s, put suburban home-owners at riskfrom value-reducing development in theirneighbourhoods and communities. Becausehome-owners had no means of insuring theirassets against these new threats, they and thedevelopers of new homes responded withpublic land-use regulations that have becomeincreasingly exclusionary. As Albert Breton(1973) first argued, zoning is best understoodas an alternative to currently non-existenthome-value insurance.

My other purpose in this essay is to ex-plain why a system of home-value insurancemight be a useful device to deal with exclu-sionary zoning. Rather than attacking mo-tives for zoning, which are typicallyunobservable and for which many substituterationales can be advanced, a more effectiveremedy would address the underlyingfinancial anxieties that give rise to exclusion-ary ordinances. Home equity insurancewould pay neighbours of a controversial de-velopment for any decline in their homes’value caused by the development. This prom-ise would assuage an important anxiety thatmotivates residents to oppose new develop-ment. Equity insurance addresses withoutfruitless moralising what may be the essen-tial problem with exclusionary zoning.

1. Zoning’s Rapid Rise Requires GeneralExplanations

Zoning started in the US a little after 1910.Many cities had ordinances with some zon-ing-like features in the 19th century (Fis-chler, 1998a). Almost all of these, however,addressed particular concerns within the de-veloped area of the city. Concern about firesmotivated attempts to regulate building con-struction. The invention of the steel-frameskyscraper induced selective light-and-airregulations such as maximum height require-ments. Some cities also adopted residentialdistricts that forbade certain businesses and,occasionally, multi-family homes.

Yet the zoning in the 1910s represented animportant break with the past. The new fea-tures were the comprehensiveness of its mapand the law’s presumption that single-familyresidences were to get the most protection.Every inch of the city (or other adoptingjurisdiction) was made subject to zoning, notjust certain sections, as was the case in ear-lier land-use regulation. Some zoning dis-tricts may be permissive either by law or bypractice, but there are no unzoned districts.Comprehensive zoning did not, as plannersoften lament, emerge from a comprehensiveplan. But in the process of designating everyacre of land to be within one zone or another,the city could now control the future use ofits land. Prospective regulation freed the cityauthorities from having to react to neigh-bourhood land-use conflicts with ad hoc reg-ulations.

The presumption that single-family dis-tricts are to get the most protection is sowidespread that we seldom ask why it shouldbe so. In other political settings, where oneworks is at least as important as where onelives, and the services of rental housing areno less important to their occupants thanthose of owner-occupied housing. Yet thesingle-family, owner-occupied home appearsto be the object of most solicitude in nearlyevery zoning ordinance. The occasional ex-ceptions that put business purposes at thetop, such as the City of Industry in LosAngeles County, California, are sufficientlyunusual to seem bizarre.

The attraction of city-wide zoning was thesecurity it gave to early 20th-century home-builders and home-owners. Once zoning wasadopted, they were no longer completely un-certain whether the nearby tract of undevel-oped land or land ripe for redevelopmentwould be put for some use that was incom-patible with their own. Home-owners andbuilders could read in a public record whatthe zoning allowed and they knew that, if adeveloper sought to change what was al-lowed, neighbours and other citizens wouldhave some influence on the political processby which the change was made.

Many accounts give New York City’s



AN ECONOMIC HISTORY OF ZONING 319

1916 ordinance the honour of being the firstcomprehensive zoning law, in that it includedthe whole city in some zone or another (Toll,1969). It is clear, however, that several otherAmerican cities were developing similar or-dinances at the same time (Fischler, 1998a;Weiss, 1987). Had New York not been first,several other cities were poised to take thetitle.

It seems unlikely, then, that zoning thuswas the product of circumstances in oneparticular place. Nor, I submit, was it theproduct of planners who had embraced the‘City Beautiful’ movement, progressiveswho supported scientific management ofgovernment or lawyers who argued for anexpansive view of the police power. Theroles of planners, progressives and lawyerswere, I believe, supply responses to a populardemand for zoning. This popular demand didnot manifest itself as direct democracy. Itwas filtered through housing developers,who, I shall demonstrate presently, foundthat they sell homes for more profit if thecommunity had zoning.

Focus on the larger cities for zoning’sorigins tends to cause modern scholars tooverlook that zoning quickly spread to thesuburbs and small towns in metropolitan ar-eas. Zoning suburbanised by the 1920s andspread rapidly (Warner, 1972, pp. 30–31).Eight cities had zoning by the end of 1916.By 1926, 68 more cities had adopted it and,between 1926 and 1936, zoning was adoptedby 1246 additional municipalities (Toll,1969, p. 193; McKenzie, 1933, p. 300). Ifthese numbers look small by today’s stan-dards, it is worth emphasising that most sub-urban development prior to 1910 took placewithin established central-city boundaries oron suburban territory that was quickly an-nexed to the city rather than independentlyincorporated (Teaford, 1979, ch. 3). Thus thenumber of independent suburbs that wouldhave occasion to adopt zoning was relativelysmall and the fraction that did so was im-pressive.

The village of Euclid, whose zoning ordi-nance was the occasion of the US SupremeCourt’s landmark decision to uphold zon-

ing’s constitutionality in 1926, was a youngsuburb of Cleveland at the time of thelegal challenge. Euclid’s victory cleared theway for zoning in almost all of the statecourts, which had been about evenly spliton the constitutionality of zoning up to1926. A few hidebound courts like NewJersey’s continued to resist the zoning tidefor a year or two, but the New Jersey Su-preme Court’s anti-zoning decisions were re-versed within a year by a state constitutionalamendment (National Municipal Review,1927; Lumund v. Board of Adjustment,1950, p. 584). That New Jersey’s consti-tutional amendment was so quickly and eas-ily adopted in that most suburban of states(its two largest central cities, Philadelphiaand New York, are outside the state) is testi-mony to the suburban enthusiasm for zoningfrom the outset.

The conventional explanation for zoning’sbirth invokes the increasing interdependenceof urban land use that arose after the dawn ofthe 20th century and the need to deal withincompatible uses by means other than tra-ditional nuisance law and private covenants.This claim is seldom closely argued, whichis just as well. Accounts of urban conditionsin the 18th and 19th centuries leave littledoubt that the nuisances and near-nuisancesthat were said to give rise to zoning weremuch worse in the past (Cronon, 1991; Tarr,1996). If it was just technical externalitiesthat gave rise to zoning, American citieswould have had it decades before its actualinception.

Nor is it credible that no one had thoughtof zoning before it was imported (at least asan idea) from Germany, whose cities hadadopted it around 1870. Regulation of landuse, albeit in a less than comprehensive way,goes way back in American history (Hart,1996) and the extension of regulation to in-clude all land seems like an easily compre-hended step. Many 18th- and 19th-centuryAmerican cities, not just Washington, DCwere laid out in detail by their founders(Reps, 1965), so urban planning was notnew.




2. The Streetcar Suburbs Set the Stage forZoning

I submit that a crucial pre-condition for zon-ing was the spread of a mechanically pow-ered, intraurban transport system. Prior to1880, most people walked to work in Ameri-can cities. Horse-drawn streetcars mountedon fixed rails existed in many larger citiesbefore the Civil War, but they were slow,environmentally problematical and limited intheir hauling capacity. As a result, the richtended to live closest to their jobs, since longwalks were irksome as well as time-consum-ing (LeRoy and Sonstelie, 1983; Gardner,2001).

The development of electric-poweredstreet railroads in the 1880s made it possiblefor urban workers to live in exclusively resi-dential districts and commute daily to theirjobs in the central city. Streetcar lines grewfrom 3000 miles, all horsedrawn, in 1882, to22 500 miles of mostly electric lines in 1902(Cudahy, 1990, p. 49). As the streetcar lineswere constructed, homebuilders responded tothe housing demands of people who couldafford the not-inconsequential commutingfares and the rich started to move to thesuburbs. Some suburban developers actuallybuilt and subsidised streetcar routesspecifically to promote their own buildinglots (Fogelson, 1967, p. 87; Korngold, 2001,p. 621).

The rich did not, however, adopt zoningupon moving to the suburbs. The best-knownhistory of early suburbanisation along trolleylines is Sam Bass Warner’s Streetcar Sub-urbs: The Process of Growth in Boston,1870–1900 (1962). Warner offers a detailedaccount of the development of Boston’sclose-in suburbs as the streetcar lines werelaid outwards from Boston’s core. He de-scribes the construction of homogeneous (asmeasured by income, not ethnicity) neigh-bourhoods by a highly fragmented, decen-tralised building industry. Small-timedevelopers built and marketed tracts ofhomes whose neighbourhoods look as if theyhad been subject to the uniform standards ofa zoning law, yet zoning was nowhere in

sight. Private covenants were used later inthe period (Korngold, 2001), but they typi-cally applied only to the original sub-di-viders’ parcel and cannot by themselvesaccount for the uniformity that existed acrosssub-dividers’ parcels.

Other observers of development in thestreetcar era (1870–1910) have also re-marked on the apparent orderliness of subur-ban development. Andrew Cappel (1991)describes the outward development of NewHaven, Connecticut, in the pre-zoning era.The uniformity with which New Haven’shomes were set back from the street, a hall-mark of later zoning laws, is striking. Usingmore quantitative methods, Daniel McMillenand John McDonald (1993) examined theland-use patterns and property values ofChicago just before it adopted zoning. Theircalculations led them to conclude that thepatterns that zoning subsequently enforcedcannot have raised land values, as zoning’sproponents argued it would. If zoning is con-cerned, as its many proponents claimed, withpromoting neighbourhood uniformity andthus preserving property values, it is notclear why any city would have adopted itduring zoning’s hey-day.

Cappel (1991, p. 632) suggests a reasonwhy land-use patterns in the pre-zoning eradid not mix apartments and commercial es-tablishments with single-family and duplexhomes. The impetus for New Haven’s subur-banisation was, as in Boston, the electricstreetcar line. Streetcars were enormous im-provements over walking and horse-drawnconveyances both in speed and comfort.Apartment houses were almost always builtnear them to take greatest advantage of theconvenience they offered tenants. Streetcarsdid not carry large amounts of freight, soonly less-noxious commercial developments,such as retail stores, were pulled out of thecentral city. Heavy industry remained con-centrated around wharves and railheads.

Apartments and commercial activity lo-cated near the streetcar lines, making theirimmediate neighbourhoods rather mixed(von Hoffman, 1996). But it was easy forbuilders of one- and two-family homes to




avoid these areas. Residential developers justhad to build single-family homes a fewblocks away from the streetcar tracks. More-over, the location of streetcar lines and theirstations was subject to public review, andboth Cappel and Charles Cheape (1980,pp. 29–32) found that homebuilders and or-ganised home-owners used their politicalinfluence to prevent streetcar intrusion intoresidential or prospectively residential areas.Control over the location of streetcar lines, inother words, was a substitute for zoning.

3. Trucks and Buses Undermined Infor-mal Land-use Controls

Cappel found that, in addition to controllingthe streetcar lines, New Haven’s home-own-ers and homebuilders relied on a web ofinformal agreements, mutual understandingsand ad hoc resort to the law to enforce thepatterns that zoning later dictated. Since in-terlopers and unco-operative developers wereonly an occasional phenomenon, they couldbe handled by neighbourhood norms thatderived from the ineluctable fact that neigh-bours have to live with one another for a longtime. Close observers of land use perceivethe importance of these relationships eventoday as supplements and sometimes substi-tutes for land-use law (Ellickson, 1991;Rudel, 1989). The original residents ofAmerican streetcar suburbs seemed to havebeen doing okay without zoning.

I submit that Henry Ford broke up thiscosy arrangement. It was not the automobilethat did it. Ford’s Model-T, which appearedin 1908, actually made it easier for middle-class suburban residents to avoid living nearthe streetcar lines, enabling developers to fillin the land between the spokes of streetcarlines that radiated from central business dis-tricts. It was instead the motor bus and themotor truck, which came into use a few yearsafter the automobile, that undermined thesecurity of suburban, single-family resi-dences.

The truck liberated heavy industry fromclose proximity to downtown railroad sta-tions and docks. It allowed manufacturers to

take advantage of lower-cost land in residen-tial districts. Leon Moses and HaroldWilliamson (1967) fix the date of the motor-truck revolution in the 1910s, just as zoningwas beginning its meteoric rise. They foundthat displacement of horses by trucks inChicago reduced the cost of freight-haulingby about 50 per cent during the 1900–20period. (See also tables from HistoricalStatistics of the United States (US Bureau ofCensus, 1975), p. 716, showing a doubling ofthe number of trucks registered about everyother year between 1905 and 1920.) Mosesand Williamson (1967, p. 215) concludedthat “the introduction of the motor truck hada greater impact on core area firms than thosealready outside the core” and thus promotedwithin-city decentralisation of industry.

The motorised passenger bus, another ex-tension of the automobile, likewise liberatedapartment developers from close proximityto the trolley tracks in the 1920s. Construc-tion of fixed-rail streetcar lines peaked in1906. By the early 1920s, jitneys and buseshad begun to replace electric streetcars.Streetcar companies themselves began to usebuses to supplement and, in lightly travelledsuburban areas, supplant trolley lines (Boyer,1983, p. 180; Schaeffer and Sklar, 1975, ch.4). Instead of having apartment builders fol-lowing the rails, the buses could be dependedupon to follow the apartment builders.(Buses could be subjected to public regu-lation like that of the street railways, but thelower cost of changing a bus route made itmore difficult for home-owners in a particu-lar neighbourhood to control them.)

4. Homebuyers Worried about Non-con-forming Neighbours

Newly footloose industrial and apartment de-velopers created a problem for home-ownersand the developers who catered to them. Avacant lot in a partially developed single-family neighbourhood could now easily besold to a non-residential user or an apartmentdeveloper. The greater profitability of doingso undermined the patchwork of common-law and informal relationships that formerly




protected home-owners. Cappel (1991,p. 634) notes that home-owners in 1920sNew Haven worried that the boom in apart-ments facilitated by the new transport mediawould overwhelm the pre-zoning institutionsthat had protected their neighbourhoods.Cappel nonetheless regards New Haven’szoning law as having been foisted on anotherwise-contented population by politicaland planning elites who wanted to put thecity in the progressive vanguard (Cappel,1991, pp. 634–636).

Comments in the 1920s by people withoutany apparent stake in the planning professionindicate that invasion of residential districtsby non-conforming uses was regarded as aserious problem. McMichael and Bingham’srespected real-estate treatise, City Growthand Values (1923) offered 2 chapters (of 36)on the new institutions of zoning and plan-ning. The authors, a real estate professionaland an attorney in Cleveland, discussed thepros and cons of zoning. Among its mostprominent advantages was protection ofhome values, especially in the suburbs, be-cause zoning forestalled the threat of apart-ments and commercial and industrial usesfrom settling in the neighbourhood.

By way of illustration of this possibility,McMichael and Bingham (1923, pp. 316,318) displayed two pictures of residentialneighbourhoods invaded by a natural-gasstorage tank and by a warehouse in the pre-zoning era. That this sort of problem wasendemic at the time is suggested by a Har-vard professor’s mention of it in his widelyused municipal government textbook (Han-ford, 1926, p. 234) as well as by state su-preme court opinions that upheld zoning atthe time (Lees, 1994, notes 179–182).Christine Boyer (1983, p. 156) confirms thatsuch incompatible uses were “commonplaceanomalies in the American city of the1920s”. This may explain why McMillen andMcDonald’s (2002) econometric study foundthat Chicago’s first zoning ordinance in 1923raised residential land values more than com-mercial values. They suggest that “residentialland-owners valued the insurance that zoningprovides against future intrusions of

conflicting commercial land uses” (McMillenand McDonald, 2002, p. 63).

William Munro, a Harvard governmentprofessor who had become vice-president ofthe National Municipal League, pointed outthe reciprocal advantages to both residentsand businesses of legally enforced separationby zoning

With a city entirely zoned, they [realtors]could assure purchasers of residentialproperty that their neighbourhoods wouldnever be encroached upon by business,while on the other hand, zoning wouldgive business property a touch of mon-opoly value. Accordingly the signs wentup on vacant lots: “Zoned for business,” orZoned for apartments,” with the definiteimplication that such action on the part ofthe public authorities had resulted in giv-ing the property a higher and more assuredvalue than it would otherwise have(Munro, 1931, p. 203).

That potential invasion of residential neigh-bourhoods by incompatible business was anew consideration was suggested by an earlyzoning advocate, Nelson Lewis. Addressingthe issue of zoning, he noted that

a few years ago any plan for such regula-tions would have had little chance ofpopular approval, but owners of real estateand building operations appear to realisethe danger of unrestricted buildings, and tobe ready and anxious to favour actionwhich will prevent further congestion,conserve real estate values, and stabilisethe character of districts where thatcharacter is desirable and improve it whereit is otherwise (Lewis, 1916, p. 353).

The anxiety that footloose business createdfor home-owners and homebuilders soontrumped the ideology of private property atthe highest levels. US Supreme Court JusticeGeorge Sutherland, hardly an enthusiast ofgovernment regulation, raised the possibilityof apartment invasion of single-home dis-tricts in his opinion in Euclid v. Ambler(1926), still the leading case on the constitu-tionality of zoning. Sutherland’s mention of




apartments is all the more interesting becausethe plaintiff, Ambler Realty Company, hadnot even complained about restrictions onapartments. Ambler’s claim was that part ofits industrial land along Euclid Avenue (justeast of Cleveland) had been zoned for resi-dential purposes. Sutherland brought up theapartment issue on his own (although amicusbriefs had addressed it) and uttered the fa-mous metaphor of apartments as “a mereparasite, constructed in order to take advan-tage of the open spaces and attractive sur-roundings created by the residential characterof the district” (Euclid v. Ambler, 1926, 272U.S. at 394).

It is possible, of course, that contemporaryjurists and commentators were beinginfluenced by ideas, such as those of the‘City Beautiful’ movement, rather than em-pirical observation. Yet accounts of the ef-fects of zoning’s adoption suggest otherwise.In an excellent review of American attitudestowards zoning in the 1910–30 era, RaphaelFischler (1998a) quotes many contemporarysources to show that protection of single-family homes was paramount from the out-set.

Even New York City, whose pioneeringordinance is often regarded as the product ofcommercial interests (Toll, 1969; Warner,1972), was pressed to protect its residentialdistricts (Fischler, 1998b). Fischler mentionsthat fear of apartment developments in sin-gle-family districts was an important concernin the outer boroughs—although in NewYork’s case, the cause of in-city suburban-ites’ anxiety was the five-cent subway farerather than the motor bus. Some outer-bor-ough home-owners were actually eager tosee the fares doubled in order to keep thelower classes out, even though it meant theyhad to pay more themselves (Fischler, 1998b,p. 179). Although the city’s zoning protec-tions were initially weak, Fischler’s quotefrom the New York Times, 22 October 1916,suggests that home-owners were quickly re-sponding to the new assurance

Barely three months after the enactment ofthe zoning code [of 1916], an optimistic

headline in the New York Times pro-claimed: “Home-Coming Season in Mur-ray Hill—Interesting Changes in OldCenter; Many Former Residents MovingBack from Uptown—Zoning Act Re-moves Fear of Business Invasion” (Fis-chler, 1998a, n. 29).

5. Covenants Had Been Tried and FoundWanting

Fischler describes how protective covenantshad been designed to shield the fashionableMurray Hill section of New York City fromcommerce and apartment development.Covenants succeeded for a time, he noted,because “time honored custom” had pre-vented commercial development at the edgesof Murray Hill (Fischler, 1998b, n. 48). Thetiming of the breakdown of this custom coin-cides with the development of trucks andbuses. After commerce and apartment devel-opment began to invade the district, home-owners opted for public controls.

Murray Hill’s experience may shed lighton a modern argument about privatecovenants as an alternative to zoning. Somecommentators have advocated covenants asif they had been overlooked when zoningstarted out (Siegan, 1972). Covenants werein fact attempted by large-scale builders inthe pre-zoning years (Weiss, 1987). Judgeswere sometimes hostile to covenants (Ellick-son, 1973, p. 716), but developers nonethe-less did employ them. The problem was thatthey did not cover enough land area. Non-conforming uses located on the borders ofwell-planned, covenanted sub-divisions, tothe detriment of the homebuyers. (One pre-sumes that the transaction costs of acquiringadditional land area to provide sufficient pro-tection were large relative to the politicalcosts of initiating zoning.)

Marc Weiss found that the developers whopioneered large-scale residential sub-divi-sions in Southern California in the pre-zon-ing era were the prime movers behind theadoption of zoning regulations in Los Ange-les (Weiss, 1987, p. 49). Developers foundthat voluntary covenants were insufficient to




protect their property’s value from incompat-ible uses on their borders. Even J. C.Nichols, whose famous Kansas City ‘countryclub’ residential developments were subjectto covenants from 1907 onwards, was anearly and active advocate of zoning (Worley,1990, pp. 121–126). Far from being some-thing forced on developers, zoning was ac-tively promoted by developer organisationsat the national level. Commerce SecretaryHerbert Hoover was induced by the home-builder lobbies to promulgate the StandardState Zoning Enabling Act of 1922, whichwas one of the most successful “modelstatutes” of all time (Weiss, 1987, p. 28).

Developer support for zoning was notbased on starry-eyed faith in the capacity ofplanners. Zoning was regarded with somesuspicion by homebuilders, and its advocateswere careful to warn that developers and realestate professionals would have to use theirpolitical influence to keep zoning withinreasonable bounds (Worley, 1990, p. 90).They also took a larger view, according toWeiss, about the possibility that some oftheir own parcels might be adversely affectedby zoning. Developers believed that zoning“would maximize aggregate land values, andstabilize values at each location, but wouldnot maximize values everywhere” (Weiss,1987, p. 101). But in the end, developer sup-port for zoning was founded on the need toinduce home-owners to invest their savingsin a large, undiversified asset. A 1920 zoningadvocate pointed out that

So long as undesirable properties couldencroach upon an area in which good resi-dences and good income-bearing proper-ties were already established, there wouldbe no stability or trust in real estate as aninvestment (Cheney, 1920, p. 33).

As planning historian Christine Boyer pointsout, zoning was seen as a way to provide “aninsurance policy that the single-family home-owner’s investment would be protected instable neighbourhood communities” (Boyer,1983, p. 148).

Modern evidence for the border effect (be-tween sub-divisions subject to covenants and

their neighbours) that developers worriedabout is found by Paul Thorsnes (2000). Hefound that present-day developers in centralMichigan sites who could assemble largersub-divisions were able to charge on theorder of 3 per cent more per lot for anadditional acre of parcel size. (Do not con-fuse the size of parcels, which is the totalamount of land to be sub-divided, with sizeof individual lots.) Thorsnes found this par-ticularly strong in rural, unincorporated areasbecause, he speculated, buyers regarded theprivate sub-division regulations as a substi-tute for the less stable zoning regulations inunincorporated areas.

Perhaps as problematic as the vulnerableborders of covenanted land was thatcovenants seldom controlled an entire mu-nicipality. This meant that the fiscal fortunesof homebuyers were left uncertain. A devel-oper of upscale homes could reasonably fearthat an adjacent tract of land might be dedi-cated to downmarket housing. Even if therewere no direct spillovers, the buyers in theupscale area would worry about whethertheir taxes would rise or public services de-cline if the rest of the land in the munici-pality were developed for lower-valuedproperties.

The connection between zoning and mu-nicipal fiscal capacity is evident in the manystudies finding that low tax rates, ceterisparibus, raise home values (Palmon andSmith, 1998). The connection leads munici-pal leaders to consider that zoning could beused to promote the tax-base by encouragingcommerce while making sure that it did notadversely affect home values and other com-ponents of the tax-base. The report of amunicipal tax committee in Pittsburgh thatrecommended adoption of zoning in 1916was explicit

If Pittsburgh is to continue to raise practi-cally all its revenues by taxing real estatevalues, steps must be taken to prevent theneedless destruction of those values and tostabilise and promote their increase in ev-ery way possible. … Should we any longertolerate sky-scrapers of unlimited height




which steal their light and air from theirneighbours, or permit the building of pub-lic garages, factories or apartments insplendid residential neighbourhoods?(Pittsburgh Committee, 1916, p. 20).

The attention to municipal expenditures andthe tax-base in the Standard State ZoningEnabling Act of 1922 (Fischel, 1985, ch. 2)also makes it clear that the progenitors ofzoning were thinking well beyond the bor-ders of individual neighbourhoods, whereproperty might be protected by covenants.Indeed, there is evidence that covenants andzoning developed side-by-side. In an accountof the development of the Cleveland areaafter the Euclid decision, Gerald Korngold(2001) points out that three nearby communi-ties were developed by a single owner andmade subject to comprehensive covenants.The municipalities are nonetheless also sub-ject to zoning and, as if to press home thatthe two devices are complements rather thansubstitutes, the covenants are legally admin-istered by the mayors of the three towns.Even where they are comprehensive,covenants may not convey enough controlover development to satisfy its residents.

6. Zoning Perpetuated Metropolitan Frag-mentation

The motor vehicle’s paternity of zoning ledto another offspring, the fragmentation ofAmerican metropolitan areas. It is wellknown and, among many academics andplanners, regularly decried that most largeAmerican metropolitan areas are governedby scores and sometimes hundreds of localgovernments. The fragmentation reflects thebottom–up approach to local government thathas prevailed through most of American his-tory. It was celebrated by de Tocqueville asa source of democratic self-governance inDemocracy in America

The political existence of the majority ofthe nations of Europe commenced in thesuperior ranks of society and was gradu-ally and imperfectly communicated to thedifferent members of the social body. In

America, on the contrary, it may be saidthat the township was organised before thecounty, the county before the state, thestate before the union (de Tocqueville,1835, vol. 1, ch. 2, pp. 39–40).

Less well known is that for much of the 19thcentury and up to 1910, suburban govern-ments were formed, de Tocqueville style,and soon after went out of existence byconsolidation with an adjacent, growing cen-tral city. Jon Teaford’s masterly review ofsuburbanisation from 1850 to 1970 foundthat, until about 1910, it was common for anexpanding central city to consolidate (andthus politically absorb) its incorporatedneighbours as well as to annex adjacent unin-corporated territory (Teaford, 1979, ch. 3).The 1850–10 period was characterised byexuberant incorporations of suburbs aroundgrowing cities followed by sober incorpora-tion into the larger body.

After 1910, however, a different patternemerged and began to be the rule by the1920s (Teaford, 1979, ch. 5). Central citiesfound that their incorporated suburbs weremuch more reluctant to give up their inde-pendence and consolidate with their largeneighbours. In addition, territory that wasformerly unincorporated (as part of thecounty) became more difficult to annex. Res-idents of unincorporated areas began to con-sider annexation by the newer suburbs orincorporation as an independent munici-pality, with no intention of eventually merg-ing with the central city.

I submit that it was the institution of zon-ing that gave rise to the newfound reluctanceof suburbs to merge with their larger neigh-bour (Fischel, 2001a, ch. 9). Prior to zoning,independent suburbs had to regard urban de-velopment and its attendant public costs asinevitable as the tides. There was little toprevent a residential structure from beingconverted to commercial use, to keep thesingle-family structure from being sub-div-ided into smaller apartments, or to stop thevacant lot from blossoming with a high-riseapartment building. Few private covenantswould cover sufficient area of land within the




municipality to afford private control overdevelopment.

Given their lack of control over develop-ment, suburbs adjacent to the central cityinevitably found the blandishments of cen-tral-city suitors attractive. As they began get-ting urban uses and urban densities, theybegan getting urban service demands. Crimeand traffic would overwhelm small-town po-lice forces and the better-organised, largerforces of the big city became more attractive.Demand for water for domestic use and fireprevention often exceeded local capacity,which was in most places already chancy andirregular. Many central cities had deliber-ately acquired excess capacity as bait fortheir outlying areas.

After zoning became popular around1910–20, suburbs no longer had to viewdevelopment like that of its larger urbanneighbour as inevitable. A small town couldcontrol its land use and fiscal destiny in theface of urban development. Consolidation nolonger looked so attractive and suburbs be-gan co-operating with one another to providewater and other basic services that had scaleeconomies, which had previously been themonopoly of the central city. Zoning thusallowed suburbs to remain independentindefinitely.

Support for the influence of zoning onmunicipal independence can be seen in his-tories of municipal incorporation activity.Accounts of 20th-century municipal forma-tion by Teaford (1979, 1997), Gary Miller(1981), Richard Cion (1966) and WilliamFischel (2001a, ch. 10) indicate that 20th-century incorporations were most often moti-vated by residents’ desire to control land useand related fiscal (tax-base protection) issues.This does not mean, of course, that each newcity was a suburb that wanted to stop devel-opment. There were plenty of pro-develop-ment municipalities formed. But even inthem, the residential districts were carefullyseparated from the fiscally profitable com-mercial and industrial areas.

Development in western and southernmetropolitan areas often occurred in ‘unin-corporated’ parts of a formerly rural county.

The county almost always stepped in to pro-vide zoning as development took place. Inmany of the modern municipal incorpora-tions, however, control over land use was anissue because the county government’s zon-ing was too pro-development, especially inits inclination to rezone formerly single-fam-ily areas for apartment units (Cion, 1966;Fischel, 2001a). Because of their larger size,which makes it more difficult for voters toknow candidates’ positions, county govern-ments were more often responsive to devel-oper interests and thus were regarded asexcessively permissive by owners of homesin existing neighbourhoods.

The desire to keep local—read home-owner—control of zoning was not only pre-sent at the creation of 20th centurymunicipalities. The chief barrier to metro-politan federalism since the 1920s has beenwhether the proposed regional governmentwould have control over land use (Teaford,1979, ch. 8). Smaller municipalities are will-ing to co-operate on many levels with theirneighbours, but ceding control over land usewithin their own boundaries has been a majorsticking-point for metropolitanism.

7. Home-owners Became Major PoliticalPlayers in the Suburbs

So far I have argued that zoning arose be-cause new modes of transport allowed peopleto separate where they lived from where theyworked, and development of motorised busesand trucks undermined traditional means ofprotecting neighbourhoods. Zoning was pre-ferred to (or added to) covenants because itprotected the borders of covenanted land andcould protect the municipal tax-base andregulate service demands. That ability in turnmade it attractive for suburban municipalitiesto maintain their independence from the cen-tral city. The last piece of the puzzle is whyhome-owners—as opposed to renters, devel-opers, employment interests, and bureaucra-cies (including planners)—should have takenover as the primary political group whoseinterests are protected by zoning.

That the detached and (typically) owner-




occupied home is at the top of the zoningpyramid is evident in nearly all zoning laws.Early illustrations of this hierarchy in factdrew pyramids with single-family homesforming the apex. The primacy of home-ownership remains so widespread that wehardly think of it as something requiringexplanation. Yet there is no theoretical rea-son why other uses of land should be re-garded as less important. Apartment-dwellersare as much citizens as home-dwellers; own-ing has long commanded no special munici-pal privilege. And the investments, bothdirect and through employment, that citizenshave in commercial, industrial and public-sector land uses are at least as considerableas in their homes. How did home-owners getthe zoning game rigged in their favour?

I submit that the urban transport revolutionthat replaced walking with motorised trans-port led to a less obvious political revolution(Fischel, 2001a). When people walked towork, they had to live close to work. Thisusually meant that their homes were withinthe same municipality as their jobs and busi-nesses. In this respect, most urban workers inthe walking cities were like most farmers,who still live where they work. Both wouldbe of two minds about prospective develop-ment: it disrupts their home and business life,but it also provides opportunities forfinancial gain. Proximity of employment toresidence in the pre-1910 walking city meantthat local governments were responsive topolicies that enhanced their constituents’ job-related wealth as well as their residentialwealth. Home-owners who lived near theirplace of business would, in deciding whichlocal candidate to support, eye the candi-date’s platform for its effect on their job-re-lated income as well as their residentialamenities.

People who moved to independent suburbsand then commuted daily via train, trolley,bus or car no longer had that binocular vision(Danielson, 1976, ch. 2). The city was wherethey worked, but the suburb, the locus oftheir residential wealth, was where theyvoted. Residential amenities—and preventionof anything that smacked of disamenity—be-

came paramount in the eyes of suburbanvoters.

We know from present-day studies that thevalue of owner-occupied homes is greatlyaffected by the things that local governmentsdo (Oates, 1969; Grieson and White, 1989).Improvements in schools, neighbourhoodsafety and public parks all raise the value ofowner-occupied homes. Conversely, in-creases in local taxes, local pollution andugly billboards all reduce home values.

For most people, an owner-occupied homeis the largest single asset they own. The riskof devaluation of this asset cannot be insuredand few home-owners can self-insure by di-versifying their other assets for the simplereason that they do not own much besidestheir house (Caplin et al., 1997). As a resultof this, prospective home-owners are carefulshoppers. They know that if things go badlyin their neighbourhood, they will be stuckhaving paid for an asset that they could sellonly at a loss. They can avoid the personalconsequences of a school system that hasunexpectedly gone bad by moving, but theycannot avoid the financial consequences. Po-tential homebuyers can see the declining testscores, too, and they adjust their offersdownwards in response.

The prospect of capital loss or gaininfluences home-owners’ behaviour afterthey have bought and moved in. It makeshome-owners, who now constitute two-thirdsof the US household population and evenmore of the suburban population, especiallywatchful citizens. They have a powerfulfinancial as well as personal incentive to payattention to local government land-use poli-cies.

As suburbs formed and became a perma-nent part of the metropolitan area after 1910,home-owners were motivated to take overlocal government, or at least the regulatoryapparatus. Urban home-ownership was grow-ing rapidly in the early 20th century, es-pecially in the suburbs (Barrows, 1983).Home-owners were numerous, well-moti-vated and lived in contiguous districts thatreduced the transaction costs of political or-ganisation. Having staked their savings in




their communities’ character, home-ownersbecame a major force in local politics. Theysupported zoning, which had originally beenproposed by homebuilding developers, andthey made their homes the primary object tobe protected.

This did not mean, of course, that job-cre-ating business was unwelcome in the com-munity. To the extent that it paid local taxesin excess of the additional cost of local ser-vices it required, business was welcome insuburbs if its neighbourhood effects were nottoo noxious or it could be sequestered into anon-residential area of the town. But themechanism by which the public was per-suaded to accept industry was no longer tiedto the voters’ employment or investment inthe business, as it was in the walking city.Public decisions about industrial zoning nowfocused on things like helping to pay prop-erty taxes and mitigating spillover effectsthat might reduce home values (Teaford,1997, p. 52).

8. From Selective to General Exclusionafter World War II

The land-use revolution that began in 1916did not happen all at once, of course. Earlyzoning laws encountered constitutional andpolitical hurdles that took time to overcome(Revell, 1999). State courts were, up to thelate 1940s, often solicitous of the rights ofdevelopment-minded land-owners (Babcock,1966; Williams, 1982). The Great De-pression and World War II set back realestate development, so the full impact ofzoning was not felt until after World War II.

Nearly all municipalities within the devel-oped parts of metropolitan areas had zoningby the 1950s. Yet zoning’s effect on housingcost and general metropolitan developmentpatterns was not much of an issue during thatera. Part of this may have been inattention byscholars, but even where the issue wouldseem to come up, as in government reportsabout housing, zoning made little impression.It was not as if suburbs were open to all. Asearly as 1953, Charles Haar pointed out theobvious exclusionary intent of minimum

house-size standards that were popular at thetime and which courts generally upheld.

Even in the late 1960s, when two parallelfederal commissions addressed zoning is-sues, the primary complaint was about subur-ban zoning’s effect on the mix of housingand prices within individual communities,not constraints on metropolitan or regionalsupply (National Commission on UrbanProblems, 1968; President’s Committee onUrban Housing, 1969.) Federal commissionsthat addressed zoning after 1970 have, incontrast, made overall housing prices a majorfocus (President’s Commission on Housing,1982; Advisory Commission on RegulatoryBarriers to Affordable Housing, 1991). Whydid zoning have so little effect on metropoli-tan housing prices before 1970?

My original view on this was that theunprecedented peacetime inflation that beganin 1973 had something to do with it (Fischel,1985, ch. 13). Inflation made new develop-ment of the same sort of housing that alreadyexisted in the community more of a fiscalburden. Previous residents had financed mu-nicipal capital expenditures (water and sewerand streets) at low interest rates. New devel-opment required infrastructure that was morecostly and could be financed only at interestrates made higher by inflationary expecta-tions. Using the previous methods offinancing, infrastructure would raise all prop-erty taxes, not just those of newcomers. Toavoid assuming a greater fiscal burden, Isuspected, existing suburban residents tight-ened their zoning requirements.

The inflation explanation no longer per-suades me. Exactions and impact fees couldeasily have handled the higher costs of newdevelopment, so that zoning would not havehad to become any tighter. Legal authorityfor such fees had long been in place (Hey-man and Gilhool, 1964). More important, asof 2002, we have had nearly two decades ofmuch lower inflation and nominal interestrates than the 1970s and early 1980s, butzoning and the housing-price differentialsthat appear to arise from it do not seem tohave let up. We now seem to have a long-lasting differential in housing prices across




regions—California and, to a lesser extent,the Northeast have persistently higher homeprices than other regions (Case and Shiller,1987; Thibodeau, 1992). These differencesdid not exist in the 1950s and 1960s. As of1967, regional differences in prices of newsingle-family homes were small and the re-gion that has become the persistent leader inhousing prices, the West (dominated by Cali-fornia), then had lower prices than both theNorth-Central and Northeast regions (US Bu-reau of Census, 1969).

It is not differential rates of growth thatcause the new price differentials, either. Thepopulation of California, the 1970s leader inthe growth control movement, grew muchmore rapidly in the 1950s and 1960s, but itspersistent higher prices did not arise beforethe 1970s (Fischel, 1995, ch. 6; Gyourko andVoith, 1992). Southern states that grew rap-idly in the 1970s did not experience housingprice inflation. In my survey of the growthcontrol literature, I found little evidence thatzoning policies affected metropolitan hous-ing prices before 1970 (Fischel, 1990).Something besides inflation seems to haveinduced a sea-change in zoning behaviour inthe 1970s.

I believe that during the 25 years afterWorld War II, zoning’s impact on suburbandevelopment was mitigated by the large var-iety of jurisdictions, each of which was ableto set its own policies. If Scarsdale was noteager to have more residential or commercialdevelopment, then developers could head tothe more accommodating suburb of NewRochelle. Most importantly, if the localgovernment of New Rochelle wanted toadopt pro-development policies, there waslittle that a minority faction within the city oranti-development groups outside the citycould do about it. For this reason, the per-missive attitude of most courts towards localzoning decisions, under which communitydecisions were typically upheld if theywanted to retard development or if theywanted to promote development (Williams,1975, ch. 2), had little impact on metropoli-tan housing patterns. Apartment and com-mercial developers who were shut out in one

municipality simply rolled up their plans andshopped around for another more willing tocut a deal.

By 1970, however, economic and socialtrends arose that made suburbs as a groupmore exclusionary. I will divide these factorsinto shifts in suburban home-owners’ de-mand for exclusion and a movement alongthe governmental supply curve of exclusion.The demand factors were: the growing sub-urbanisation of employment (as opposed tojust residences) resulting from the interstatehighway system; and, the expansion of egali-tarian legal principles that derived from thecivil rights movement of the 1960s. Thechief element that facilitated the supply ofexclusion was the environmental movementthat dawned on the national scene in 1970.

9. Interstate Highways Made Businessesand Poor People Footloose

As interstate highways were built in the1960s, jobs began to follow residents to thesuburbs at an increasing rate (Glaeser andKahn, 2001). Suburbs with sufficientamounts of vacant land and residents eager tohave help paying their property taxes accom-modated this hegira with the oxymoronic‘industrial park’ and other zoning innova-tions (Teaford, 1997). The decentralisation ofmetropolitan employment meant that work-ers no longer needed to live near a singlecentral business district. This undermined theclassic urban-economics conception of jobsin a central city surrounded by successivelyhigher-income rings of suburbs. Once jobssuburbanised, low-income workers who hadformerly resided close to central cities toconserve on commuting costs now had tofind jobs in the suburbs. Indeed, for thosepoor without automobiles or confined byracial prejudice to the central cities, the ‘spa-tial mismatch’ between jobs and homes be-came a real concern (Ihlanfeldt, 1997).

Although the suburbs had always beenzoned, administration of the rules up to the1960s was often flexible (Babcock, 1966).Farmland in a developing suburb was ofteninitially zoned for three-acre lots as a tempo-




rary ‘holding zone’. Land-owners and civicleaders expected such land to be rezoned tosmaller lots as development pressure arose.The new development was not much fearedby existing home-owners because it was ex-pected to be more of the same type of homesthat were already there. But as jobs decen-tralised, the ‘natural’ factors that had estab-lished the high-income suburbs—the greaterpull for the rich of cheaper suburban landcompared with their larger suburban travelcost—started to break down.

Ownership of automobiles grew from 59per cent of all households in 1950 to 82 percent in 1970. The difference in travel costsamong income-groups was reduced primarilyto the opportunity cost of time, which islower for the poor. Urban miles travelled bypassenger vehicles grew by 73 per cent be-tween 1960 and 1970, a higher rate of growththan any previously recorded decade (USBureau of Census, 1975, p. 718). As jobs forboth rich and poor became decentralised, thepoor were almost as inclined to live in adistant suburb as the rich.

In one sense this was a replication of thefirst era of zoning in the 1910–30 period. Justas in the 1910s class segregation by proxim-ity to streetcar lines (where the poor livedclosest to them because they had no cars) hadbeen broken by the intraurban truck and bus,so the income segregation of the suburbs wasbroken in the 1960s by the increasing use ofautomobiles and the rapid decentralisation ofjobs facilitated by new highways.

At the same time, quality of life became amore important issue for existing suburbanhome-owners, since they, too, were less tiedby location near the central city. In the multi-nucleated metropolis, urban jobs are almostequally far from any given suburb. BruceHamilton (1982) showed that by the 1970smetropolitan commuting patterns looked al-most random when compared with the sub-urb-to-central-city paradigm. Communitieshad come to be chosen more for quality oflife than for commuting convenience. TheTiebout (1956) model, in which public ser-vices are determined by householders ‘votingwith their feet’ among numerous suburbs,

became a more realistic description of loca-tion decisions and home values (Oates,1969). Nowadays, the local school’s testscores are a larger determinant of home val-ues than access to jobs (Haurin and Brasing-ton, 1996).

With a community’s quality of life a moreimportant determinant of home values thanlocation vis-a-vis jobs, home-owners becameeven more watchful of zoning changes thatmight affect that quality of life. The formerlyrelaxed accommodation of development ofthe 1950s began to harden into a reluctanceto rezone. The three-acre minimum lot sizesand farmland categories that had formerlybeen regarded as ‘holding’ zones solidifiedinto a permanent cast that kept the poor andhigher-density development at bay (Downs,1973).

10. Civil-rights Law Drove Suburbs toGeneral Exclusion

Besides job decentralisation, the civil rightsmovement of the 1960s had a profound butsubtle effect on suburban land-use decisions.The incipient use of zoning to segregateraces by neighbourhood or community hadbeen struck down in 1917 in Buchanan v.Warley. Maintenance of segregation by theuse of private covenants, which were in anycase an incomplete substitute for racial zon-ing (since holdout land-owners could sellprofitably to Blacks), had been legally under-mined in 1948 by Shelley v. Kraemer. Whatwas new in the 1970s were the federal andstate fair-housing laws that made it morecostly to keep Blacks out by private discrimi-nation and by informal means, such as racialsteering.

Anything that looked like racial zoningwas almost never tolerated by the courts.Zoning could, however, be used to reducepotential contact between races, or betweenhigh- and low-income people, by the faciallyneutral expedient of insisting on large lotsand single-family homes in residential dis-tricts. Racial anxieties could not, of course,be mentioned in any public document as areason for the ordinance. Local officials




learned quickly to expunge any such lan-guage. And, in my opinion, the issue forWhite suburbanites has rarely been race it-self. Zoning in Vermont and New Hamp-shire, two states with minuscule fractions ofracial minorities, does not look very differentfrom zoning in heterogeneous New York andCalifornia. Exclusion is far more an income-based, class issue (Fennell, 2001).

The heirs of the civil rights lawyers recog-nised that the issue of the 1970s has not beenjust inequality among races, but economicinequality generally. They brought legaltools to bear on what they perceived as themaldistribution of wealth created by subur-banisation. The new legal targets were nolonger segregated schools and overt racialdiscrimination in housing. They were nowinequalities in school spending (Wise, 1967)and property tax resources (Coons et al.,1969) and zoning laws that made it es-pecially difficult to build private and publichousing for the poor in the suburbs (Sager,1969). The legal attack on local property taxfinancing of schools and the assault on exclu-sionary zoning were undertaken for the samereason, to open the advantages of suburbs tothe less affluent.

As an aside, I would note that the attackson local school-finance systems have hadmuch greater success than legal attacks onexclusionary zoning. Almost half of thestates have had plaintiff victories in theschool-finance area and, even where suitshave been lost, states have responded defen-sively by centralising school finance andmaking differences in property tax-bases lessimportant (Hoxby, 1997; Joondeph, 1995).Yet there is almost no evidence that this hasreduced exclusionary zoning (Fischel, 2001a,pp. 158–159).

The foregoing changes since 1960—de-centralised jobs and civil rights liability—shifted the suburbanites’ demand for zoning.The poor were knocking at their gates andpublic-interest lawyers were poised to manthe battering rams. Zoning’s older means ofexclusion, which overtly favoured single-family homes and discouraged apartments,was newly vulnerable to legal attack. The

Mount Laurel decisions in New Jersey in1975 and 1985 served notice that deferenceto municipal exclusivity, once formerlywarmly endorsed by the New Jersey courtsand most others (Williams, 1975, ch. 5), wasnow under siege (Haar, 1996). Even thoughMount Laurel itself has not been widelycopied, the sentiments it embodies are sharedby courts in almost all states.

The suburbs’ response to this new threatwas to adopt the facially neutral policy ofrestricting all development, not just that forlow-income people. The rubric for doing sowas ‘growth management’ which became, asNorman Williams (1982, p. 235) put it, “amajor movement in the 1970s—apparentlyspringing up spontaneously in local areas allover the country”. Faced with the curtailmentof selective exclusion, localities began to optfor general exclusion. Moreover, the courtsseemed untroubled by this, as shown by theMount Laurel court’s dictum

Finally, once a community has satisfied itsfair share obligation [a fraction of the re-gion’s low-income housing], the MountLaurel Doctrine will not restrict othermeasures, including large-lot and openarea zoning, that would maintain its beautyand communal character (Mount Laurel II,456 A.2d at 421).

Adopting larger lot and ‘open space’ zoning,two mainstays of growth management, hadthe drawback of foregoing some fiscallyprofitable commercial development. Formany home-owners, however, that was afiscally acceptable trade-off. If attracting in-dustry meant having to take the people whoworked there, better not to seek it. Newcommercial development and high-valuehousing, moreover, were becoming lessfiscally profitable in many states as property-tax-base sharing formulas for financingschools were put in place.

11. Environmentalism Supplied the Ideol-ogy for General Exclusion

I have so far described the factors that ledsuburbs to demand more general exclusion of




development. Yet anti-growth politics werenot easy to supply. Important changes inzoning such as growth controls require aunifying ideology to get them implemented.Economic advantage is a useful private moti-vator, but it plays poorly in public discourse.Something less obviously selfish is requiredto get other community residents to rallyaround the cause.

The early-20th-century idealisation of thesingle-family home as a font of virtue is saidto have helped unify a potentially disparategroup, home-owning residents, into a pur-poseful political force (Lees, 1994; Fischler,1998a). Home-and-hearth ideology helpedstate and federal judges, typically drawnfrom the same social spectrum as suburbanhome-owners, to suspend their scruplesabout the new zoning laws’ effect on segre-gating people by their station in life. Judgeson both the left and right side of the politicalspectrum did worry about this in the 1910sand 1920s.

In the 1970s, however, a new ideologywas needed to justify the suburban shift fromselective growth to reduced growth. Home-and-hearth ideology, after all, applied to thepoor as well as the middle class, to theowners of condominiums and mobile homesas well as to owners of standard single-fam-ily houses. The environmental movement ofthe early 1970s provided a seemingly newand compelling ideology to justify a moregeneral exclusion of development.

Much of the ‘limits to growth’ literature,which was conceived on an internationalscale as a computer-simulation project, wasquickly adapted to the particulars of localland use (Meadows, 1991). ‘Think globally,act locally’ became the unofficial mantra,and acting locally typically means preservingopen space from the bulldozer. Farmlandpreservation, which fits somewhat uncom-fortably into an environmental agenda (out-side the suburbs, farming is usually criticisedby environmentalists), has nonetheless alsobeen embraced as a means of shunting devel-opment to other communities (Kline andWichelns, 1994). The mottos of no-growth,slow growth, managed growth and (cur-

rently) ‘smart growth’ are all facially neutralwatchwords which nonetheless are effectivesubstitutes for more selective means of keep-ing the poor out of the suburbs (Downs,1994).

As mentioned above, general metropolitandevelopment in the 1920–60 era was notmuch affected by zoning because of the var-iety of local governments. For every suburbthat was dedicated to exclusionary zoning,there was a not-too-distant town that wasmore than willing to accommodate develop-ment. The pro-development communitieswere either dominated (for a time) by land-owner and developer interests, or they hadstarted out poor enough (as, say, formerlyisolated factory towns) that middle-incomehousing and apartments looked fiscally at-tractive to them. Where an affluent suburbmight reject a middle-income developmentbecause of its impact on local schools, alower-income suburb might see the sameproposal as the road to educational salvation.Variety among the suburbs—still falsely pre-sumed to be ‘homogeneous’—ensured thatmarket-driven development had a place togo.

Municipal autonomy in zoning was under-mined in the 1970s by several trends thathave grown out of the environmental move-ment. The more universal was the empower-ment of neighbours who were dissatisfiedwith the pro-development decisions of theirown local government and its bodies. Thelegal rule up to the 1970s had been thatneighbours usually lose when making thesechallenges (Williams, 1975, ch. 2).

The environmental legislation of the1970s, by which I mean both the NationalEnvironmental Protection Act (NEPA) andits state-law equivalents and related legis-lation, empowered private citizens to bringlitigation against their own local govern-ments in a different legal setting from the old‘neighbours’ cases’ (Frieden, 1979). Courts,whose judges share the same environmentalattitudes as middle-class home-owners (justas 1920s judges shared the ideology of hearthand home) were more sympathetic to claimsthat the local decision had failed to account




for environmental impacts than they hadbeen to seemingly selfish claims that neigh-bours’ home values were at risk.

12. The Double-veto System Worksagainst Development

Simultaneous with the new empowerment ofneighbours was the development of state andregional authorities whose mission was todeal with regional issues. Dubbed ‘the quietrevolution’ by Bosselman and Callies (1971),this movement attempted to transcend local-ism in order to deal with issues that spilledover from one municipality to another. Landuse was embraced as one of the regionalissues, but regionalism faced (and continuesto face) a political problem. As Teaford(1997, ch. 8) showed, regionalism had beenrejected after the 1920s because proposedregional governments would supersede localzoning. Individual cities wanted both theright to reject development and to promote itas they pleased.

The regional governance arrangementsthat began to be formed in the 1970s found aworkable compromise. Instead of giving theregional authority plenary power over landuse, the systems that evolved were almost allof the ‘double veto’ variety (Fischel, 1989;Popper, 1988). A real estate developer had tojump through the regional authority’s hoopas well as the local authority’s. If he missedeither jump, he was out of the running. Theregional authority, however, could not makethe local authority accept a proposal that thelocals had rejected. (The exceptions such asthe Massachusetts ‘anti-snob zoning’ act andPortland, Oregon’s, metropolitan land-useboard, are sufficiently unusual to prove therule (Danielson, 1976, chs. 9 and 10; Mildneret al., 1996).) The double-veto structure dis-tinguished the Quiet Revolution from earlierregional proposals, and that made it accept-able to the increasingly anti-developmentsuburbs.

I submit that neighbour empowerment anddouble-veto systems, in conjunction with lo-cal application of environmental laws,changed metropolitan development patterns

after 1970. Pro-development communities,which had formerly been the suburban safetyvalves for higher-density uses, were less ableto accommodate lower-income housing. Thefact that the objections to the new develop-ment came from a small minority of its ownresidents or from people who did not live inthe community, as at a regional land-usehearing, was now less relevant. The tinyminority and the outsiders now could stop orat least delay and modify (mostly by propos-ing fewer units) development in communitiesthat had previously offered developers one-stop regulatory shopping.

I do not wish to be entirely censorious ofthis trend. It is possible that the empower-ment of neighbours rectified an unjust situ-ation, one in which majoritarian preferencessubsumed the well-being of a defencelessfew within the community. Putting thenecessary but unlovely land use in the poorneighbourhood or in the poor community is aclassic example of what the 1990s ‘environ-mental justice’ movement sought to rectify(Lazarus, 1992). It is also possible that inter-municipal spillovers sometimes went unac-counted for by those who made land-usedecisions. Indeed, social scientists have hy-pothesised a ‘beggar thy neighbour’ syn-drome, in which a municipality deliberatelyzones for fiscally profitable but polluting in-dustries along its downwind or downstreamborders (Ingberman, 1995).

I say “it is possible” in these cases becausethe evidence for them is surprisingly slim,especially when compared with the intellec-tual freight they are made to bear. (They areat the core of the 1970 decision to federaliseenvironmental legislation (Esty, 1996).)Studies of zoning board decisions have foundthat they have been remarkably sensitive toimmediate neighbours’ objections, even be-fore neighbours carried the threat of federalenvironmental lawsuits in their back pockets(Tideman, 1969). Modern searches for sys-tematic examples of ‘environmental racism’have mostly come up short (Been, 1994).Likewise, the few documented beggar-thy-neighbour examples turn out on closer in-spection to look more like mutually




advantageous deals than one-sided oppor-tunism (Fischel, 2001a, ch. 8).

One reason for optimism in these cases isanalogous to why most home-owners try tobe civil to their neighbours even if they donot like them. Careless or opportunistic be-haviour invites retaliation in kind. The nu-merous and long-term interactions betweenmunicipal neighbours cautions the oppor-tunistic types to think about long-term conse-quences (Gillette, 2001). The municipalnorm may not be ‘love thy neighbour’, but‘respect thy neighbour’ is closer to the truththan the opportunistic hypothesis wouldhave it.

13. Would It Be Better to DiscourageHome-ownership?

I have so far argued that zoning and theprimacy it gives to owner-occupied housinggrew out of anxieties on the part of home-owners that more intensive uses would de-value their homes. As residences weremoved away from central-city jobs, localvoters paid more attention to their homesthan their business. As jobs in turn decen-tralised and automobile costs continued todecline, the economic constraints that hadonce kept the poor tied to central cities madeit feasible for them to move to the suburbs.The same civil rights lawyers who hadhelped tear down the wall of officiallyadopted racism now turned to the more sub-tle problem of de facto economic segregationcaused by suburban zoning. In response tothis, suburbs enlisted the environmentalmovement to provide an alternative rationaleto pull up the gangplank.

My purpose here is not to indict home-owners or environmentalists. I claim mem-bership in the first and sympathy with thesecond group and, anyway, it would be likerailing against the wind. In fact, the futilityof opposing widely popular institutions iswhat informs my remedy. If the underlyingcause of exclusionary zoning is concernabout home values, then why not address thatconcern with a financial instrument and take

away (or at least reduce) the exclusionarymotive?

One approach is to reduce the incidence ofhome-ownership. The major policy thatwould accomplish that would be to tax theimputed rent on owner-occupied housing.Housing is the largest financial asset that isuntaxed by the federal government and it ispossible that home-ownership could be re-duced substantially from the present 67 percent of all households if the federal govern-ment taxed its imputed net rent. Switzerland,the only developed nation fully to tax im-puted rent, has the lowest home-ownershiprate in Europe, 30 per cent (Oswald, 1996).To tax imputed rent, the government wouldhave to estimate what owner-occupiedhouses would rent for and then tax the netincome (gross rent less property tax, mainte-nance, depreciation and mortgage interest) asif it were wages or salaries.

Reducing home-ownership is an unlikelypolicy. Indeed, many important institutionsare dedicated to increasing ownership ofhomes. There are some good reasons for this.The same risk-aversion on the part of home-owners that gives rise to the NIMBY (‘not inmy back yard’) syndrome and exclusionaryzoning also works for more attractive goals.For example, home-ownership motivateschildless people to vote for (or at least notvote against) local school bonds that actuallyimprove education (Sonstelie and Portney,1980; Harris et al., 2001). Someone whoowns a home that has more than one bed-room is interested in the quality of schoolsbecause prospective buyers will be interestedin them. Even if she does not plan to sellsoon, her home’s value is the major assetagainst which she can borrow money. (Ofthose who point to cases where elderly votersdo defeat school spending proposals, I askwhy all school spending is not locally re-duced to its minimum, given that in mostplaces much more than half of the electoratehave no children in public schools.)

It is not just schools that get home-owners’support. Numerous studies have pointed outthat home-owners are more involved, watch-ful citizens than renters, even after one ac-




counts for other differences between the twoforms of housing tenure, such as differencesin income and race (Davis and Hayes, 1993;DiPasquale and Glaeser, 1999). Home-own-ers participate more in neighbourhood affairsand their children seem to turn out better(Green and White, 1997), just as the single-family zoning advocates of the 1920s saidthey would.

14. Home-equity Insurance Might AssuageHome-owners

The essential question, then, is how to makehome-owners less anxious about develop-ment in their communities while still retain-ing the desirable incentives that home-ownership provides. The answer I haveproposed elsewhere is selective home equityinsurance (Fischel, 2001b). A prototypewas adopted in the late 1970s in Oak Park,Illinois, to discourage panic selling in theface of racial transition (McNamara, 1984).It has apparently been successful and someother communities in the Chicago area haveadopted it (Mahue, 1991). I have been toldthat developers sometimes pay to enrollopponents to their projects in theseprogrammes, which pay the differencebetween the appraised value and the salevalue if it is negative. (The Illinois enablinglegislation, 65 ILCS 95, describes the pro-cedures.)

Here I am going to state some of thedifficulties in undertaking such an insurancescheme to assuage concerns about neigh-bourhood change. I undertake this seeminglyself-defeating exercise to justify a concertedpublic effort in this direction. For if home-equity insurance is the answer, why have thecreative people who do real estate develop-ment and finance not come up with it on theirown? To put it more bluntly, if I am so smart(about home values being the key), why amI not rich (by investing in a home-equityinsurance scheme)?

For a home-equity insurance plan to work,it has to reduce the risks to a home-owner ofa particular development that might affecthim without otherwise affecting his or the

developer’s behaviour. But home-equityinsurance, even more than the regular kindof home-owner insurance, is subject tomoral hazard and adverse selection. RobertShiller and Allan Weiss (1998) have investi-gated this issue in the context of a metro-politan home-value insurance scheme. Theirpurpose is different from mine. They areinterested in creating home-equity marketsto insure against metropolitan swings invalue, so that home-owners do not gettrapped in a low-value region and becomeunable to move to a high-value part of thecountry (such as California and the North-east). My concern is far more localised; I amconsidering home-equity insurance forneighbourhoods. Nonetheless, the difficultiesin establishing home-equity insurance aresimilar.

If companies were to offer home-equityinsurance as a third-party financial instru-ment, they would have to monitor closely thebehaviour of both developers and home-own-ers. The reason for this is that some level ofNIMBYism is a desirable thing. Planningand zoning officials can seldom learn enoughon their own about a given location to beable to tell if a particular development willbe a net plus for the community. The presentsystem of relying on the testimony of com-munity members, especially neighbours, hasthe desirable quality of inducing people tobring out the spillover costs of the develop-ment.

A development that would devalue nearbyresidences by more than it would increase itsown land value should not be implemented.But if the neighbours were fully insured, theymight have insufficient incentive to revealthe adverse effects. A developer might offerto pay the insurance premium for these peo-ple to keep them quiet, knowing that theinsurance company will cover the loss. Toavoid that problem, the insurance companywould have to undertake a cost–benefit cal-culation of every proposed development.

This difficulty is more easily controlled forinsurance against fires, burglary or naturaldisasters. The ‘moral hazard’ in such casescan be managed by the insurance company’s




insistence on easily monitored precautions,such as installing smoke detectors, puttinglocks on doors and building outside floodplains. But the moral hazard from adverseneighbourhood conditions is more difficult tomonitor because they are typically unique toa particular neighbourhood and the proposeddevelopment. The development that couldtrigger the insurance is, unlike a burglary,often benign. A new convenience store maybe a neighbourhood benefit in one place, anet cost in another. To winnow the goodfrom the bad developments, the insurancecompany would have to hire an experiencedland planner to investigate most zoningchanges, variances and other exceptions tothe status quo.

Some readers may have already askedthemselves why I approach insurance as if itmust be offered by third parties. Why notmake the developers offer the insurance?They have more information about what cango wrong than most others, so they should bemade liable for it. The problem in my view isthat both developers and their opponents, theneighbours, would want to have a third partyunderwrite the insurance. Developers wouldwant it because their administrative costswould be raised by offering insurance. It isnot easy to manage an insurance programme.Indeed, one reason the Illinois programmewas called Home Equity Assurance was toavoid the regulations that are imposed on theinsurance business in every state.

A more important problem is that neigh-bours would be sceptical of insurancefinanced solely by a developer. Developmentis a notoriously unstable business, and it iseasy to imagine the developer going bank-rupt prior to the time that insurance pay-outswould, if justified, actually be due. It may bepossible to overcome this with special bond-ing arrangements, but that again raises theproblem of how a third party (who suppliesthe bond) can determine whether the devel-oper’s project is a good neighbourhood risk.

The other large barrier to home-equity in-surance is the development of a local housingprice index on which to base pay-outs. (TheOak Park scheme and others like it in the

Chicago area insure only nominal home val-ues and so require costly reappraisals to dealwith inflation. This may not be much of aproblem in areas where housing prices do notgrow rapidly.) A national or even regionalprice index would not be enough to deter-mine how much, if at all, a particular neigh-bour’s home has decreased in value as aresult of a controversial development. Hous-ing prices rise and fall for all sorts of rea-sons, and it is clear that prices in oneneighbourhood can change at a different ratefrom those in another neighbourhood, even ifneither has suffered any localised land-usechanges. How would one distinguish a fall inrelative home values in a neighbourhood be-cause the school-attendance boundaries werechanged rather than from the approval anddevelopment of a public housing project?Modern econometric techniques can be ap-plied to net out such effects for a largesample of observations, but it is not clear thatsuch results could be applied to individualclaims.

The difficulties of developing a home-eq-uity insurance market, which I think haveprevented it from being developed privately,should not be regarded as insuperable. Oneshould not underestimate the creativity of thefinancial market to overcome them. The sec-ondary market for mortgages must haveseemed an unlikely possibility prior to itsdevelopment. Case et al. (1993) have madesome, albeit halting progress in developingpractical metropolitan housing price indexes,and the lessons learned there might informdevelopment of more local indexes. Thepublic costs of undertaking more researchand a demonstration project on this should bebalanced against the social and economiccosts of the problem of exclusionary zoning.By most indications, they are not trivialcosts.

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