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Zoning at 85: Do we still need it?
Myths 3 & 4: It reduces property values; its a bad idea

This year marks the 85th anniversary of the landmark United States Supreme Court case Euclid v Ambler Realty, which upheld the basic constitutionality of local zoning. Given the current debate between liberals and conservatives about the appropriate role of regulation in shaping our economy and our communities, it seems timely to ask the question: do we still need zoning?

MYTH #3 – Land use controls will reduce property values and increase taxes.

Fact: It is sprawl – not zoning – that increases taxes. Haphazard, inefficient land uses require taxpayers to pay more and more for roads, sewers, schools, utilities and other public infrastructure. Zoning can, of course, affect the layout of a community and this in turn can affect public expenditures, but zoning that encourages a mix of uses or other efficient land use patterns can help to reduce public expenditures, while a purely laissez-faire approach can have the opposite impact.

As for property values, it is true that zoning and other land use controls can affect property values. Every day hundreds of decisions are made by public bodies that affect someone's property values: however these decisions are just as likely to increase the value of property as to diminish it, for example a rezoning from agricultural to commercial use or an increased density allowance could greatly increase the value of land.

In practice, sensible land use controls almost always enhance rather than diminish property values. If you don't believe this visit almost any local historic district and compare property values in the historic district to similar neighborhoods outside the district. In almost every case the more heavily regulated property will have the higher value. On the other hand try selling a home next to a junk yard, an asphalt plant or other noxious use.  To understand how zoning can positively affect value, let's look at a nationally famous example:  In 1988, the Denver City Council created an historic district in what was then the city's skid row.  It was called the Lower Downtown Historic District.

A majority of the area's property owners opposed the designation fearing a loss of property values. Before designation, the once thriving commercial area had a vacancy rate of 40 percent and 30 percent of the properties had been foreclosed.  Blighted conditions triggered precipitous declines in property values, despite the fact that there were few regulations standing in the way of re-development. After the imposition of historic district zoning the area came back to life.  In a few short years, the area was transformed. By 1995, Lower Downtown was home to 55 restaurants and clubs, 30 art galleries and 650 new residential units (Today it has thousands of residents). Property values had doubled and private investment, not including Coors Field - home of the Colorado Rockies baseball team - had exceeded $100 million.

So how did historic district zoning contribute to Lower Downtown's success? The answer is simple: scarcity and certainty create value in real estate.  Before the designation you could do anything you wanted, but there was no investment because there was no certainty.   After historic designation, small businesses and investors were lured to the area by its charm and historic character – and by the knowledge that it would remain that way.  In other words, historic district zoning gave investors the assurance that if they spent millions rehabilitating a turn-of-the-century building, this investment would not be undermined by their next door neighbor demolishing their building and putting up billboards, parking lots or other insensitive development.

Nationally known real estate appraiser Don Rypkema says "sensible land use controls are central to economic competitiveness in the 21 st century."

Myth #4 – Land use planning is a bad idea

Fact: The truth is virtually every successful individual, organization, corporation and community plans for the future.  As we said before, failing to plan means planning to fail.  Try imagining a company that didn't have a business plan.  They would have a very hard time attracting investors and they would be at a huge disadvantage in a competitive marketplace.  The same is true of communities.

Community planning is about choices.  Communities can grow by choice or by chance. People can accept the kind of community they are given or they can create the kind of community they want.  In a democracy, citizens have a right to choose the future and to have some idea what it will look like.  A comprehensive plan is like a blueprint. It allows a community to set out its goals and objectives.  Even the Bible recognizes the importance of planning.  The book of Proverbs says: "Without vision the people will perish."

Land use planning provides the essential bedrock on which zoning should be founded.  Just as a business plan won't work if every salesman or business unit could take it or leave it, at their discretion, land use planning won't work without implementing regulations. In fact communities that engage in zoning in isolation from planning are setting themselves up for failure, as their regulations will appear arbitrary and capricious, without any consistent purpose.

Continued on Saturday:
Part IV -  Myth (5) Houston, Texas proves that zoning is unnecessary and the Series Conclusion

© 2011 Urban Land Institute.

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Part I: Zoning at 85: Do we still need it?

Part II - Myths 1 and 2: (1) Zoning is un-American and (2) Small towns and rural areas don't need to control uses of land.

Part III - Myths 3 and 4: (3) Land use controls will reduce property values and increase taxes and (4) Land use planning is a bad idea.