Market Urbanism Liberalizing cities | From the bottom up Wed, 17 Jan 2018 15:40:50 +0000 en-US hourly 1 Market Urbanism 32 32 3505127 Mini review: Suburb, by Royce Hanson Wed, 17 Jan 2018 15:40:50 +0000 This scholarly book is about planning politics in Montgomery County, a (mostly) affluent suburb of Washington, D.C.  The book contains chapters on redevelopment of inner ring, transit-friendly areas such as Friendship Heights and Silver Spring, but also discusses outer suburbs and the county’s agricultural areas. From my perspective, the most interesting section of the book […]

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This scholarly book is about planning politics in Montgomery County, a (mostly) affluent suburb of Washington, D.C.  The book contains chapters on redevelopment of inner ring, transit-friendly areas such as Friendship Heights and Silver Spring, but also discusses outer suburbs and the county’s agricultural areas.

From my perspective, the most interesting section of the book was the chapter on Friendship Heights and Bethesda, two inner-ring areas near subway stops.  When landowners proposed to redevelop these areas, the planning staff actually downzoned them (p. 56)- and NIMBYs fought the planning board, arguing that even more downzoning was necessary to prevent unwelcome development.

These downzoning decisions were based on the staff’s “transportation capacity analysis”- the idea that an area’s roads can only support X feet of additional development.  For example, Hanson writes that Friendship Heights “could support only 1.6 million square feet of additional development.” (p. 62).   Similarly, he writes that Bethesda’s “roads and transit could handle only 12 million square feet of new development at an acceptable level of service.” (p. 75)

Thus, planning staff artificially limited development based on “level of service “(LOS) .  “Level of service” is a concept used to grade automobile traffic; where traffic is free-flowing the LOS is A.  But the idea that development is inappropriate in low-LOS places seems a bit inconsistent with my experience. Bethesda and Friendship Heights zip codes have about 5000-10,000 people per square mile; many places with far more density seem to function adequately.   For example, Kew Gardens Hills in central Queens has 27,000 people per square mile, relies on bus service, and yet seems to be a moderately popular area.

Moreover, the use of LOS to cap density has a variety of other negative effects.  First, places with free-flowing traffic tend to be dangerous for pedestrians; for example, if an arterial is at LOS A, cars travel over 35 mph and thus create a high risk of injury or death to walkers.  Second, when people and jobs are excluded from transit-friendly places such as Bethesda, they do not disappear.  Instead, they migrate elsewhere- often to more car-dependent places, increasing regional auto traffic.  Third, policies that limit housing anywhere reduce the regional supply of housing, thus affecting regionwide housing costs.

At any rate, this book’s value for market urbanists is to show what planners really do.  Sprawl supporters often paint zoning as a reflection of the market, and planners as pro-density ideologues.  But in fact, planners often seek to split the difference between developers who seek to create housing and jobs, and nearby homeowners who want less of both.


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Book Review: The Public Wealth of Cities Fri, 05 Jan 2018 16:41:19 +0000 The Public Wealth of Cities by Dag Detter and Stefan Fölster proposes a series of reforms to improve municipal finances. The authors lay out guidelines for creating urban wealth funds (UWFs) and argue that financial stability is key to societal success.   Detter and Fölster first call for basic financial competency. According to the authors, most […]

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The Public Wealth of Cities by Dag Detter and Stefan Fölster proposes a series of reforms to improve municipal finances. The authors lay out guidelines for creating urban wealth funds (UWFs) and argue that financial stability is key to societal success.
Detter and Fölster first call for basic financial competency. According to the authors, most cities don’t even know what they actually own. Real estate and equipment are often owned directly by individual departments with no central record to provide a bird’s eye view of a city’s assets as a whole. When this is the case, good asset management becomes impossible because no one knows what they’re managing.
The authors also point out the need for cities to decide what is and is not a commercial asset. Where administrators designate an asset as commercial, maximizing ROI should supersede all other objectives. That doesn’t mean everything a city owns has to be managed to turn a profit, but where a piece of real estate or a facility is meant generate income, it ought to be managed explicitly to that end.
Professional financial planning is Detter and Fölster’s third major prescription. They argue that cities should hire professional asset managers to oversee their portfolios and that these managers should be shielded from the democratic process. They go on to make a very public choice argument that elected officials have inappropriately short time horizons and that pressure to please constituents can lead to decisions at odds with the long term sustainability of municipal finances. After developing that line of reasoning, they provide Singapore as an example of a municipality that does this pretty well.
In terms of the ideas presented, I loved the book. It touches on the organizational challenges of getting municipal finance right while speaking to what execution has to look like as well. It also moves us beyond a discussion limited to taxation and into a conversation about how municipal authorities can claw back some of the value they create, the same as we’d expect any firm in the private sector to do; and in so doing, it offers sustainable ways to fund those functions that won’t make money, but that we’d like to see supported all the same. 
On the flip side, the first couple chapters are a little repetitive. If I had to guess, I’d say the publisher was pushing for a minimum page count and the authors added some fluff. And, do remember, this is a book on municipal finance. If you don’t already geek out about topics like the institutional structure of the Hong Kong Metro Transit Railway Corporation…you might find it a little dry. Beyond that, though, it’s an informative read and well worth your time if you care about the nuts an bolts of municipal finance (and wouldn’t mind seeing the loose screws affixed a little more tightly). 

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Liberty Machines™ Sun, 31 Dec 2017 17:26:16 +0000 During an urbanist twitter free-for-all last week, the thoroughly awesome term “liberty machines” was used to describe the virtues of the car. The claim was made that cars let individuals go wherever they want, whenever they want and are therefore a ‘freedom enhancing’ form of transit.  This isn’t the first time I’ve heard this argument in […]

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During an urbanist twitter free-for-all last week, the thoroughly awesome term “liberty machines” was used to describe the virtues of the car. The claim was made that cars let individuals go wherever they want, whenever they want and are therefore a ‘freedom enhancing’ form of transit

This isn’t the first time I’ve heard this argument in libertarian(ish) circles. But it doesn’t tally with my experience and I’m not sure it makes any sense even within its own premise.

A Personal Anecdote and a Couple Thoughts

When I learned to drive way back when, it was in the great state of Texas where driving is basically a necessity. In that context, getting my license (and being economically fortunate enough to have access to a car) was certainly liberating for me after a fashion.

Thinking back, though, I enjoyed far less mobility as a car bound teenager in suburban Houston than I do now living in Oakland, California. I walk to the grocery, take BART to work, bike to the gym, catch a Lyft to go out, and/or drive myself when the occasion demands. Most of my trips are multimodal and the integration of transit modes affords me far more freedom of movement than car use alone ever could.

The biggest reason for this is that single occupancy vehicle use doesn’t scale as a stand alone system. Unpriced roadways are prone to hitting congestion points and, as readers of this blog are probably aware, adding lanes doesn’t helpWhen roads become clogged, and there are no viable alternatives, a reliance on cars becomes a constraint. And to respond to the idea that mass transit relies on government subsidies and car use does not…the technical term for that would be factually incorrect. Mass transit is more than capable of paying for itself and let’s just say highways don’t exist in the state of nature. 

Houston Traffic, aka my personal hell

Returning to this idea of ‘freedom enhancing’ transit, a reliance on cars has got to be the worst of all options. Besides the congestion problems, there are distributional impacts as well. If you’re too young or too old to drive, you’re reliant on those who still can. Not to mention the fixed overhead of car ownership is a regressive burden on the least well off.

So…is there a case for the car as the pro-liberty choice in transit? Not as far as I can see. And while #libertymachines is an incredibly tweetable hashtag, it’ll have to remain ironic for now.

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Zoning Laws, the Housing Market and the Ripple Effect Thu, 28 Dec 2017 13:23:18 +0000 The adoption of zoning as a means of preventing external costs led to inefficient use of land and caused many individuals to suffer great unfairness.

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ripple effect housing

 Henry Hazlitt has called economics a science of recognizing secondary consequences. What he and others who have taken the time to study the working of free markets have perceived is that there is a natural orderliness in uncoerced dealings between men which tends to maximize the well-being of each individual and put resources to their best use. But to accomplish this, a market must be free, which means that each participant must be allowed to decide for himself how he will use his assets, whether personal skills, money, or physical property. Whenever government compels a person to use his property in a way other than he would freely have chosen, this natural orderliness is upset.

The effect of any such tampering with a market may be likened to throwing a stone into a calm pool. Waves of disturbance will ripple outward. Unfortunately, government will now look upon these ripples as new problems calling for its false remedies, and throw more stones in an attempt to neutralize the unwanted and unforeseen consequences of its earlier stone-throwing. I call this the ripple effect; it is nothing other than a failure to foresee secondary consequences.

This article is about one form of governmental interference with free markets which nicely illustrates the ripple effect. It is about zoning ordinances, particularly those which regulate the type of housing a person may build on his property. Such ordinances demonstrably have worsened the housing situation in this country, have been a vehicle for much manipulation, unfairness and favoritism, and, of course, have spawned new coercive remedies designed to set aright the problems zoning has caused. What government cannot see is that these "remedies" will even further impair the functioning of the housing market.

A Primer on Zoning

A zoning ordinance is a decree by government that land in its jurisdiction may be used only in accordance with its regulations. These regulations are contained in a zoning map, which designates the permissible uses for property in each zone. For example, a subdivision might be zoned to permit only single-family dwellings on lots of one acre or more.

The original rationale behind zoning was that it was necessary to prevent nuisances. City governments thought it desirable that industry and retail trade be segregated lest their attendant smoke, noise, and traffic impose costs on residential areas. The paradigm case zoning was aimed at would be the construction of a steel mill on a quiet, shady street. Zoning based upon this argument was upheld by the Supreme Court even though its adoption might cause an enormous loss to the owner of affected property. 1

Zoning, however, was not limited to the segregation of industrial from residential areas. It was also used to demarcate the boundaries for single-and multi-family housing. When challenged in court, cities argued that allowing apartment buildings to be constructed next to single-family houses would shut off air and light to the latter, increase noise and traffic, and deprive children of places to play. Lurking behind these doubtful arguments (which the Supreme Court also accepted as justifying zoning of this nature) was the objective of protecting the property values of homeowners against the decline which would follow if their area became less exclusive. It will be observed that this concern has nothing to do with true nuisances such as pollution and noise, but rather is an attempt to use the coercive power of government to protect against those losses which free markets must necessarily sometimes inflict.

The Law of Nuisance

The common law had long recognized actions for nuisance when zoning first became popular. This action was based upon the idea, inseparable from the argument for freedom, that one does not have a right to make use of his property in such a way as to injure or render less fit for use the property of another. If one did so, he might be compelled by a court to pay for the extent of his damage, and the destructive use might also be enjoined.

Now, it cannot be said that nuisance suits ever became a perfect solution to the problem of externalities (the imposition of costs by one landowner upon his neighbors). Legal actions have high transaction costs, and success is never a sure thing. And if the losses were spread over a large number of people—e.g., smoke damage from a steel mill—almost certainly no one of them would feel sufficiently aggrieved to undertake the expense of a lawsuit (at least prior to the advent of the class action). These factors served to deter many from asserting their legal rights.

All this may be admitted without indicting nuisance law for any inherent flaw. Courts and legislatures could have devised new procedures fairer to plaintiffs and new remedies for accommodating competing interests had they seen the necessity to do so. Nuisance law, however, has suffered from extreme neglect during the nation’s half-century infatuation with zoning. Even so, there have been noteworthy nuisance cases in the last few years, indicating that zoning is not the only answer to the externalities problem.2

Zoning vs. Nuisance Law

It is important to compare the way in which zoning and nuisance law operate. Nuisance law is based on the market idea that one should pay for the costs that he causes to be incurred, and works punitively—at least until people come to know what uses will probably cause them to have to pay penalties. At that point, uses for which the expected costs are too high will be deterred. Thus, nuisance law should—or could—lead to the same sort of economic calculation which underlies any business decision. An entrepreneur would decide against building a steel mill in a residential area for the same reason he would decide against building one where it was difficult to get raw materials—the costs Would be too high. On the other hand, a contemplated use of land, a grocery store, for instance, might impose small costs on the neighboring owners, but still be a worthwhile project because of large expected returns. It is this sort of rational economic calculation which optimizes the use of resources. Zoning, however, does not allow individual decisions as to the costs and benefits of the uses of land. While zoning may prevent some nuisances3, it lacks the ability to discriminate between nuisances which are worth their cost and those which are not, and prohibits some land uses which would not be nuisances at all. This is so because zoning is not predicated upon a calculation of costs and benefits, but only upon a planning "expert’s" notion of how cities ought to be patterned. With zoning, we pay a high cost in efficiency to prevent an unknown but probably small number of nuisances. The planners cannot know how much land will be demanded for each possible use at the time they draw up the zoning map; too much may be allocated to light industry, or too little to multifamily dwellings. As a result, we have waste and inefficiency.4

"Exclusionary" Zoning

Now we meet the villain of the piece. After the courts gave the green light to zoning, people quickly realized what a powerful tool they had been given. All manner of restrictions might be put on the use of land which would guarantee that "undesirable types" would have to live somewhere else. Municipalities frequently enacted ordinances requiring a minimum lot size of an acre or more; often there was no provision for apartment houses and mobile homes, while in some cases they were even affirmatively excluded. Various rationales were advanced to justify these interferences with freedom, but none more than tenuously linked to any proper governmental function of protecting health or safety, or preventing nuisances. At the bottom was always the desire to exclude people of lesser income from the community.

It was in the mid-sixties that the people who are usually so fond of government planning and who enthusiastically support zoning as long as it is "only" commercial interests which are affected, realized that they had created a monster. The shoe was on the other foot now—one of their favored groups, the poor, was being victimized by zoning. The result was a large number of courtroom battles over the legality of what was called "exclusionary" zoning. (All zoning is exclusionary, but never mind.)

The Legal Outcome

In several cases, courts struck down large minimum lot size ordinances. Those who believe in freedom can applaud such decisions; if a group desires to insulate itself from the rest of society, it may do so by purchasing enough land to achieve that objective, but it is wrong to do so through the use of the coercive power of government. Unfortunately, not all courts and legislative bodies were content with a mere restoration of freedom. Instead, they sought to rectify the problems created by zoning by imposing even more zoning.

The leading case, Southern Burlington County NAACP v. Township of Mt. Laurel, comes to us from the Supreme Court of New Jersey.5 In ringing language, the court invalidated the town’s highly restrictive zoning scheme, and then intoned that every developing community has an obligation:

Affirmatively to plan and provide, by its land use regulations, the reasonable opportunity for an appropriate variety and choice of housing, including, of course, low and moderate cost housing, to meet the needs, desires and resources of all categories of people who may desire to live within its boundaries.

The animating force behind the court’s ruling was not a belief in liberty, but rather a simple-minded mathematical notion that each municipality should contain its "fair share" of low- and middle-income residents.

This idea that people should be distributed throughout society in accordance with precise ratios shows forth even more disturbingly in the so-called "inclusionary" zoning ordinance. The concept, which has found some support in academic journals6, is to require a developer to include a specific percentage of units for low-income families if he is to be allowed to construct any multifamily project. Such an ordinance was enacted in Fairfax County, Virginia, but was held unconstitutional by the Supreme Court of Virginia.’

Making the Problem Worse

Both the Mt. Laurel "fair share" requirement and the "inclusionary" ordinance recognize that zoning has been used to limit the number of places where poor people might live, and seek to remedy the shortage of housing which has resulted. But at best they will be ineffective, and will probably succeed in making the problem worse.

New housing is seldom constructed expressly for the poor. (One exception, of course, is the federal government, but its efforts, such as the famed Pruitt-Igoe project, have been smashing failures.) Rather, the poor benefit from the filtering down of older housing left empty as wealthier individuals move into new or better homes. Careful empirical studies have demonstrated that this intuitively appealing proposition is true.8 Therefore, to the extent that "inclusionary" ordinances or judicially mandated "fair share" plans operate to decrease the total amount of housing which is constructed, they will work against the poor by diminishing the filtering down of older housing.

There are a number of reasons to believe that these legal mandates will, in fact, lead to less housing construction. Consider first the likely eventuality that, under a "fair share" requirement, an incorrect amount of land would be zoned for low-cost housing—i.e., more or less than would be so used in an unhampered market. This must be considered likely because a developing community cannot know what sort of commerce will choose to locate in it, and hence the characteristics of the workforce which may desire to live there will also be unknown. Merely because there is a heavy-industry zone, for instance, there will be no reason to assume that some specific percentage of poor people will be employed. The skill and income level of the workforce will vary greatly depending on whether labor or capital intensive industries move in. Thus, the planner’s guess will probably be wrong when he zones for housing. If too much land is allocated for one type of housing, too little must be for other types. Some land will be inefficiently used, total construction will be less than we would have had in the absence of zoning, and fewer old homes will become available to the poor.

Discouraging Developers

Secondly, we must consider the attitudes of the would-be developers ordered by an "inclusionary" ordinance to use a part of their property for the construction of low-cost housing. They may be reluctant to undertake the project thus presented for any of several reasons. With the mandatory low-income units, the overall rate of return may not be sufficient to induce the builder to devote his resources to this development as opposed to one where he finds no government interference. Or, the developer may have doubts about the marketability of the non-low-income units if compelled to put them in close proximity to those built for the poor. A related concern might be the possibility of high maintenance costs for the low-income units. Reflection upon the way property frequently is treated in the inner city might well dissuade one from building with the poor in mind as tenants. Yet another obstacle might be the architectural difficulties of integrating the smaller low-income units in the same structure with larger apartments designed for the affluent.

Thirdly, many of the reasons which might make the developer hesitant would also be on the minds of prospective lenders. Even if the former were willing, the latter might not be. The result: housing construction foregone.

Two more arguments tell against these schemes to provide better housing for the poor. So far we have left out the intended beneficiaries of this new housing, the poor themselves. Are many of them likely to be interested? Professor Banfield has pointed out that the inner-city dweller is accustomed to the nature of life there, and probably would feel bored and uncomfortable if transported out to suburbia.9 The spaciousness and solitude would be entirely alien, and the preferred entertainments and companionship would be far removed. In short, there is reason to doubt that there would be enough takers for this housing to fill the government’s quotas, leading to further waste.

Lastly, it must be emphasized that low-income housing is quite infeasible without government subsidies. The Mt. Laurel court expressly noted this. Do we really want the availability of housing for the poor to depend upon the caprices of federal and state budgeting? The government is anything but a trustworthy provider. A change in administration or voter sentiment could halt building in progress and prevent new construction from being undertaken, again to the detriment of the poor. Uncertainty is one of the prices one pays for government dependence.

No doubt there are more arguments, and perhaps more persuasive ones which could be advanced against these plans. All I have attempted to accomplish in this brief space is to show that the government did not, and indeed cannot, take into consideration all of the reactions one might expect to its tampering with the housing market. Not enough housing for the poor? Why then just zone for more, or compel people to build more, says the government. This simple minded solution pays no heed to secondary consequences, and forgets that people have minds and wills of their own. That is why it will fail.


The adoption of zoning as a means of preventing external costs was ill-considered in the first instance. It led to inefficient use of land and at the same time caused many individuals to suffer great unfairness. Once this authoritarian power to restrict the uses to which a property owner could devote his land was acknowledged as legitimate, it followed inexorably that it would be misused to protect well-placed interests and exclude poor people from developing communities. In attempting to solve this government-created problem in the housing market, courts and legislatures have resorted to more of the statist medicine of coercion. "Inclusionary" zoning and "fair share" plans will not make more housing available to the poor, and will probably have the opposite effect. Then, we may confidently predict, government will react with yet more counterproductive laws and directives.

The radical solution to the chaos zoning has brought to land markets is to eliminate it. To be sure, people then will erect some buildings and do other things with their property that others will not like. If those uses actually interfere with the enjoyment of property by others, those people affected should be encouraged to sue in nuisance to obtain compensation for the damage done. If the offending use does not amount to a true nuisance—an apartment with poor people as tenants, or a building painted an ugly color—that is something people who live in a free society will just have to tolerate as one of the annoyances of life. The alternative to a regime of freedom in land use is zoning with its ever-present potential for waste and inefficiency, inequity and manipulation. Let us choose freedom.

‘ Village of Euclid v. Ambler Realty, 272 U.S. 365 (1926). The value of Ambler Realty’s holding fell by $300,000 when its tract was put in a residential zone.

²See, e.g., Boomer v. Atlantic Cement Co., 287 N.Y.S.2d 112. The court there refused to enjoin the operations of a cement plant, but awarded the plaintiffs the amount by which their property had been permanently damaged (based on market value) plus an amount equal to the ongoing monthly costs the plant imposed on them.

³It is not clear that cities would look much different in the absence of zoning. Professor Siegan points out in his book Land Use Without Zoning that Houston has no zoning, yet the market has neatly segregated industrial and residential districts simply on the basis of the differing characteristics which attract each type of development.

"Zoning decisions, it must be said, are not unalterable. Zoning maps may be changed or variances granted. But it is never certain that zoning mistakes will be corrected through these mechanisms. Whether a zoning change is made or blocked usually does not depend upon abstract considerations of eff¹ciency, but rather on the ability of interested parties to pressure the decision makers. Moreover, these escape hatches from zoning have frequently been used by unscrupulous persons to gain windfalls. See Ellickson, "Alternatives to Zoning", 40 U. of Chicago Law Rev. 681, 701-05.

5336 A.2? 713. 6See Kleven, "Inclusionary Ordinances—Policy and Legal Issues in Requiring Developers to Build Low Cost Housing", 21 UCLA Law Rev. 1432.

‘Board of Supervisors v. DeGroff Enterprises, 198 S.E. 2" 600.

8See Lansing, Clifton and Morgan, New Homes and Poor People: A Study of Claims of Moves, Survey Research Center, Institute of Social Research, Univ of Michigan (1969). 9See The Unheavenly City, especially chapter 2.

George C. Leef

George C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy, and is a graduate of the Duke University School of Law, Durham, North Carolina.

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Mini review: Vanishing New York, by Jeremiah Moss Fri, 15 Dec 2017 20:45:00 +0000 I recently read a highly publicized pro-NIMBY book, Vanishing New York.   The author, who goes by the pen name “Jeremiah Moss” tells a simple story: throughout New York, gentrification and chain stores are on the march, making the city rich and boring.  The story has an element of truth: obviously, there are some places that […]

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Vanishing New York

I recently read a highly publicized pro-NIMBY book, Vanishing New York.   The author, who goes by the pen name “Jeremiah Moss” tells a simple story: throughout New York, gentrification and chain stores are on the march, making the city rich and boring.  The story has an element of truth: obviously, there are some places that have gentrified, and there are some places (mostly notably Times Square) that have lots and lots of banks and chain stores.

But on balance, the book’s relationship with factual reality is a bit uneven.  Much of the book complains about the evils of gentrification. But in fact, even in Manhattan the poverty rate is 17.9 percent, about three times that of most New York suburbs. Moss also claims that the city is getting whiter, but even Manhattan is 40 percent black and Hispanic, and New York City as a whole is 54 percent black and Hispanic. By contrast, in 1980 the city was only 45 percent black/Hispanic, and in 1940 it was over 90 percent white.

Moss seems to think that the city is being taken over by chain stores. The last time I walked through the East Village (one of the neighborhoods he writes about) I found about one or two such stores per block, or about 5 or 10 percent of all storefronts.  My guess is that Moss thinks about chain stores the way many racists think about racial minorities: because they assume one is too many, 5 percent seems to them like a takeover.

Moss is all for immigration from foreign nations, but constantly complains about newcomers, especially parents; he uses the word “stroller” like anti-Semites use the term “international bankers”- as a code-word for a dreaded enemy.  He has a problem with college students too (complaining about “NYU’s presence… [having] spread like a virus”).   My impression is that Moss believes that cities should be a bantustan for bohemians and low-income minorities- everyone else keep out!

His history is sometimes based on fantasy: he suggests that 1970s fires in poor areas were “part of a conspiracy to chase blacks and Puerto Ricans from the city.” Since New York got less and less white throughout the 20th century, this would be one of the most unsuccessful conspiracies in American history.

Moss writes that the High Line “flatten[ed] multiple neighborhoods” and created “a dreamworld of exclusion.” So one might think that the Chelsea neighborhood surrounding the High Line lost people. Right? Wrong? Zip code 10001 (the Chelsea zip code) had about 17,000 people in 2000, and had just over 23,000 in 2015. Moss writes that because of gentrification “blacks were no longer the majority population in Harlem.” Not completely false (depending on how you define Harlem) but highly misleading. As blacks have been mostly replaced by Hispanics, Central Harlem is 79 percent black/Hispanic and only 15 percent white. Because the neighborhood’s population has grown by 30,000 people since 2000, it actually has more nonwhites than 15 years ago.

Moss is at least aware of the harms caused by high rents, but his remedies actually would exacerbate gentrification. He favors rent control and allowing neighborhoods to vote on housing – in English, less new housing. These policies would make the city’s existing housing shortage even worse, creating even more gentrification as people priced out of one neighborhood gentrify another.

Based on the largely favorable reviews, many people had a positive emotional reaction to this book.  I did not.  I think that my aversion to this book is based not just on policy disagreements, but on my vision of what a central city should look like.  Moss dreams of a 1970s New York, a city that is desirable only for bohemians and for people who cannot afford to live elsewhere.  I want to rebuild the city of the 1940s, a city that includes middle-class Republicans as well as bohemians.

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The Distorting Effects of Transportation Subsidies Thu, 14 Dec 2017 13:15:04 +0000 Subsidies to transportation tend to lengthen supply and distribution chains. Large corporations are artificially competitive against smaller, local firms.

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by Kevin Carson

This article won the 2011 Beth A. Hoffman Memorial Prize for Economic Writing.

Although critics on the left are very astute in describing the evils of present-day society, they usually fail to understand either the root of those problems (government intervention) or their solution (the operation of a freed market). In Progressive commentary on energy, pollution, and so on—otherwise often quite insightful—calls for government intervention are quite common. George Monbiot, for instance, has written that “[t]he only rational response to both the impending end of the Oil Age and the menace of global warming is to redesign our cities, our farming and our lives. But this cannot happen without massive political pressure.”

But this is precisely backward. Existing problems of excess energy consumption, pollution, big-box stores, the car culture, and suburban sprawl result from the “massive political pressure” that has already been applied, over the past several decades, to “redesign our cities, our farming, and our lives.” The root of all the problems Monbiot finds so objectionable is State intervention in the marketplace.

In particular, subsidies to transportation have probably done more than any other factor (with the possible exception of intellectual property law) to determine the present shape of the American corporate economy. Currently predominating firm sizes and market areas are the result of government subsidies to transportation.

Adam Smith argued over 200 years ago that the fairest way of funding transportation infrastructure was user fees rather than general revenues: “When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tonnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them.”

This is not, however, how things were actually done. Powerful business interests have used their political influence since the beginning of American history to secure government funding for “internal improvements.” The real turning point was the government’s role in creating the railroad system from the mid-nineteenth century on. The national railroad system as we know it was almost entirely a creature of the State.

The federal railroad land grants included not only the rights-of-way for the actual railroads, but extended 15-mile tracts on both sides. As the lines were completed, this adjoining land became prime real estate and skyrocketed in value. As new communities sprang up along the routes, every house and business in town was built on land acquired from the railroads. The tracts also frequently included valuable timberland. The railroads, according to Matthew Josephson (The Robber Barons), were “land companies” whose directors “did a rushing land business in farm lands and town sites at rising prices.” For example, under the terms of the Pacific Railroad bill, the Union Pacific (which built from the Mississippi westward) was granted 12 million acres of land and $27 million worth of 30-year government bonds. The Central Pacific (built from the West Coast eastward) received nine million acres and $24 million worth of bonds. The total land grants to the railroads amounted to about six times the area of France.

Theodore Judah, chief engineer for what became the Central Pacific, assured potential investors “that it could be done—if government aid were obtained. For the cost would be terrible.” Collis Huntington, the leading promoter for the project, engaged in a sordid combination of strategically placed bribes and appeals to communities’ fears of being bypassed in order to extort grants of “rights of way, terminal and harbor sites, and . . . stock or bond subscriptions ranging from $150,000 to $1,000,000” from a long string of local governments that included San Francisco, Stockton, and Sacramento.

Government also revised tort and contract law to ease the carriers’ way—for example, by exempting common carriers from liability for many kinds of physical damage caused by their operation.

Had railroad ventures been forced to bear their own initial capital outlays—securing rights of way, preparing roadbeds, and laying track, without land grants and government purchases of their bonds—the railroads would likely have developed instead along the initial lines on which Lewis Mumford speculated in The City in History: many local rail networks linking communities into local industrial economies. The regional and national interlinkages of local networks, when they did occur, would have been far fewer and far smaller in capacity. The comparative costs of local and national distribution, accordingly, would have been quite different. In a nation of hundreds of local industrial economies, with long-distance rail transport much more costly than at present, the natural pattern of industrialization would have been to integrate small-scale power machinery into flexible manufacturing for local markets.

Alfred Chandler, in The Visible Hand, argued that the creation of the national railroad system made possible, first, national wholesale and retail markets, and then large manufacturing firms serving the national market. The existence of unified national markets served by large-scale manufacturers depended on a reliable, high-volume distribution system operating on a national level. The railroad and telegraph, “so essential to high-volume production and distribution,” were in Chandler’s view what made possible this steady flow of goods through the distribution pipeline: “The revolution in the processes of distribution and production rested in large part on the new transportation and communications infrastructure. Modern mass production and mass distribution depend on the speed, volume, and regularity in the movement of goods and messages made possible by the coming of the railroad, telegraph and steamship.”

The Tipping Point

The creation of a single national market, unified by a high-volume distribution system, was probably the tipping point between two possible industrial systems. As Mumford argued in Technics and Civilization, the main economic reason for large-scale production in the factory system was the need to economize on power from prime movers. Factories were filled with long rows of machines, all connected by belts to drive shafts from a single steam engine. The invention of the electric motor changed all this: A prime mover, appropriately scaled, could be built into each individual machine. As a result, it was possible to scale machinery to the flow of production and situate it close to the point of consumption.

With the introduction of electrical power, as described by Charles Sabel and Michael Piore in The Second Industrial Divide, there were two alternative possibilities for organizing production around the new electrical machinery: decentralized production for local markets, integrating general-purpose machinery into craft production and governed on a demand-pull basis with short production runs and frequent shifts between product lines; or centralized production using expensive, product-specific machinery in large batches on a supply-push basis. The first alternative was the one most naturally suited to the new possibilities offered by electrical power. But in fact what was chosen was the second alternative. The role of the State in creating a single national market, with artificially low distribution costs, was almost certainly what tipped the balance between them.

The railroads, themselves largely creatures of the State, in turn actively promoted the concentration of industry through their rate policies. Sabel and Piore argue that “the railroads’ policy of favoring their largest customers, through rebates” was a central factor in the rise of the large corporation. Once in place, the railroads—being a high fixed-cost industry—had “a tremendous incentive to use their capacity in a continuous, stable way. This incentive meant, in turn, that they had an interest in stabilizing the output of their principal customers—an interest that extended to protecting their customers from competitors who were served by other railroads. It is therefore not surprising that the railroads promoted merger schemes that had this effect, nor that they favored the resulting corporations or trusts with rebates.”

Reprising the Role

As new forms of transportation emerged, the government reprised its role, subsidizing both the national highway and civil aviation systems.

From its beginning the American automotive industry formed a “complex” with the petroleum industry and government highway projects. The “most powerful pressure group in Washington” (as a PBS documentary called it) began in June 1932, when GM president Alfred P. Sloan created the National Highway Users Conference, inviting oil and rubber firms to help GM bankroll a propaganda and lobbying effort that continues to this day.

Whatever the political motivation behind it, the economic effect of the interstate system should hardly be controversial. Virtually 100 percent of roadbed damage to highways is caused by heavy trucks. After repeated liberalization of maximum weight restrictions, far beyond the heaviest conceivable weight the interstate roadbeds were originally designed to support, fuel taxes fail miserably at capturing from big-rig operators the cost of pavement damage caused by higher axle loads. And truckers have been successful at scrapping weight-distance user charges in all but a few western states, where the push for repeal continues. So only about half the revenue of the highway trust fund comes from fees or fuel taxes on the trucking industry, and the rest is externalized on private automobiles.

This doesn’t even count the 20 percent of highway funding that’s still subsidized by general revenues, or the role of eminent domain in lowering the transaction costs involved in building new highways or expanding existing ones.

As for the civil aviation system, from the beginning it was a creature of the State. Its original physical infrastructure was built entirely with federal grants and tax-free municipal bonds. Professor Stephen Paul Dempsey of the University of Denver in 1992 estimated the replacement value of this infrastructure at $1 trillion. The federal government didn’t even start collecting user fees from airline passengers and freight shippers until 1971. Even with such user fees paid into the Airport and Airways Trust Fund, the system still required taxpayer subsidies of $3 billion to maintain the Federal Aviation Administration’s network of control towers, air traffic control centers, and tens of thousands of air traffic controllers.

Eminent domain also remains central to the building of new airports and expansion of existing airports, as it does with highways.

Subsidies to airport and air traffic control infrastructure are only part of the picture. Equally important was the direct role of the State in creating the heavy aircraft industry, whose jumbo jets revolutionized civil aviation after World War II. In Harry Truman and the War Scare of 1948, Frank Kofsky described the aircraft industry as spiraling into red ink after the end of the war and on the verge of bankruptcy when it was rescued by the Cold War (and more specifically Truman’s heavy bomber program). David Noble, in America by Design, made a convincing case that civilian jumbo jets were only profitable thanks to the government’s heavy bomber contracts; the production runs for the civilian market alone were too small to pay for the complex and expensive machinery. The 747 is essentially a spinoff of military production. The civil aviation system is, many times over, a creature of the State.

The State and the Corporation

It’s hard to avoid the conclusion that the dominant business model in the American economy, and the size of the prevailing corporate business unit, are direct results of such policies. A subsidy to any factor of production amounts to a subsidy of those firms whose business models rely most heavily on that factor, at the expense of those who depend on it the least. Subsidies to transportation, by keeping the cost of distribution artificially low, tend to lengthen supply and distribution chains. They make large corporations operating over wide market areas artificially competitive against smaller firms producing for local markets—not to mention big-box retailers with their warehouses-on-wheels distribution model.

Some consequentialists treat this as a justification for transportation subsidies: Subsidies are good because they make possible mass-production industry and large-scale distribution, which are (it is claimed) inherently more efficient (because of those magically unlimited “economies of scale,” of course).

Tibor Machan argued just the opposite in the February 1999 Freeman:

Some people will say that stringent protection of rights [against eminent domain] would lead to small airports, at best, and many constraints on construction. Of course—but what’s so wrong with that?

Perhaps the worst thing about modern industrial life has been the power of political authorities to grant special privileges to some enterprises to violate the rights of third parties whose permission would be too expensive to obtain. The need to obtain that permission would indeed seriously impede what most environmentalists see as rampant—indeed reckless—industrialization.

The system of private property rights . . . is the greatest moderator of human aspirations. . . . In short, people may reach goals they aren’t able to reach with their own resources only by convincing others, through arguments and fair exchanges, to cooperate.

In any case, the “efficiencies” resulting from subsidized centralization are entirely spurious. If the efficiencies of large-scale production were sufficient to compensate for increased distribution costs, it would not be necessary to shift a major portion of the latter to taxpayers to make the former profitable. If an economic activity is only profitable when a portion of the cost side of the ledger is concealed, and will not be undertaken when all costs are fully internalized by an economic actor, then it’s not really efficient. And when total distribution costs (including those currently shifted to the taxpayer) exceed mass-production industry’s ostensible savings in unit cost of production, the “efficiencies” of large-scale production are illusory.

Kevin A. Carson

Kevin A. Carson

Kevin Carson is a senior fellow of the Center for a Stateless Society and holds the Center’s Karl Hess Chair in Social Theory. He is a mutualist and individualist anarchist whose written work includes Studies in Mutualist Political Economy, Organization Theory: A Libertarian Perspective, and The Homebrew Industrial Revolution: A Low-Overhead Manifesto, all of which are freely available online. Carson has also written for such print publications as The Freeman.

This article was originally published on Read the original article.

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The Rent is Too High and the Commute is Too Long: We Need Market Urbanism Mon, 27 Nov 2017 13:55:00 +0000 Why is the rent so damn high? And why does it take hours to commute from cheap, plentiful housing to modern economy jobs? If you are living in a big city in America, you likely face this problem. And it isn’t just an American problem: From Ireland to New Zealand to The Philippines, the rent/commuting […]

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Dense Development Around Tokyo Transit

Why is the rent so damn high? And why does it take hours to commute from cheap, plentiful housing to modern economy jobs? If you are living in a big city in America, you likely face this problem. And it isn’t just an American problem: From Ireland to New Zealand to The Philippines, the rent/commuting crisis is hitting the 21st century hard, right in the big cities where most of the economic growth is coming from, and where most of the jobs are. Meanwhile, in the economically blighted regions of America, everything seems to be falling apart, with lead in the tap water, crumbling roads, and municipal bankruptcy for thousands of towns and cities a very real possibility.

But it doesn’t have to be this way. There are a few cities that seem to have figured out how to match a futuristic tech economy with futuristic transit and housing for the masses. And there are many small towns around the world that don’t face insurmountable backlogs of infrastructure repairs. What are they doing different? Why is the price per square foot for living space in Tokyo a third of what it is in Boston or San Francisco?  Both cities have similar incomes and geographic constraints. Why is it an enormous scandal in Japan when trains leave a few seconds off schedule, while in America it is normal for your bus or train to be an hour late or never show up at all? Chalking this up to cultural differences is an easy explanation, and may have some weight, but I submit that the underlying laws of human economics do not vary based on culture, and there is much that we can learn from looking abroad.

For Americans, the story begins in the nineteenth century when most of the country’s infrastructure was privately owned, as described in the paper “From Privies to Boulevards: The Private Supply of Infrastructure in the United States During the Nineteenth Century.” As a stand-in for all infrastructure, from highways to subways to sidewalks, let’s discuss sewers as a starting point. The main complaint at the time was that private sewer companies were not expanding fast enough: “Indeed, the main criticism leveled against private suppliers at the time was not poor service per se but a reluctance to expand to outlying areas.”

This frustration led to municipal regulation, subsidy, and eventually municipalization of the sewer systems: “By 1902, no city with a population of over thirty thousand still had a private sewer company.” Service began expanding to all areas of the city, and soon even small towns followed suit and were municipalizing and rapidly expanding their sewers, and nearly all their formerly private infrastructure. Problem solved, right?

Which brings us to Lafayette, Louisiana, the 200th largest city in the US, with a growing economy and a public infrastructure system that’s growing even faster. Charles Marohn, an infrastructure consultant, was hired to figure out why the city’s backlog of repairs was growing longer every year, and whether there were any solutions. His analysis is quite morbid:

Except for a small handful of North American cities – literally five or less – Lafayette provides an insight into why your city has no money. Problems have solutions. Predicaments have outcomes. What is happening in Lafayette is not a problem; it's a predicament…When we added up the replacement cost of all of the city's infrastructure -- an expense we would anticipate them cumulatively experiencing roughly once a generation -- it came to $32 billion. When we added up the entire tax base of the city, all of the private wealth sustained by that infrastructure, it came to just $16 billion.

There is simply no way that Lafayette will be able to maintain the infrastructure it has built, and Lafayette’s story is America’s story. How did the great infrastructure bubble occur? The core of the problem is about decision making process: How does a municipality decide whether to make a particular expansion of its infrastructure?

Back in the days of private infrastructure, a company would determine whether a given sewer expansion was profitable by adding up the expected sewer fees and determining whether they were greater than the long-term maintenance costs.  i.e., was the investment profitable? With democratic municipalities, the decision-making process is quite different.

In a nutshell, the political economy of our democratic municipalities revolves around homeowner control. The main negotiation is one between the homeowners and the public employees, with some influence from developers, and even less from renters who are typically not very involved with their local government. The incentives of the homeowners are to lower taxes to as great a degree as possible while at the same time maintaining a well-funded public school, one of the main determinants of home price.

This is easily accomplished by allowing two types of construction: More single family homes in the same price range as existing homes, and new commercial property that yields a revenue stream without associated public school costs. Projects that are almost always opposed are ones that increase density in areas that don’t require new infrastructure, due to the NIMBY principle: It is an extremely rare thing in American politics post-WWII for an already built neighborhood to become more dense than they already are. Downzoning is the norm, and upzoning is an atypical exception. Before zoning took hold of America post-WWII, the normal development pattern was for the town center to be where almost all of the new development happened, and this is how towns grew into cities. After zoning, this process stopped: Once a neighborhood was even partially built out, it was typically downzoned so no new construction could occur.

Furthermore, homeowners care about the future of their towns for the next few years until they sell, but not beyond that. The story goes like this: A new shopping mall or cul de sac is proposed. The developer offers to pay for the initial install of the infrastructure, and for a decade or two there is new tax revenue with minimal costs, and everything is going fine. But then the town’s maintenance obligations kick in. Even in Homeowners Associations (HOAs) that are supposedly infrastructure self-sufficient, when the infrastructure reaches the end of its life cycle, there is nearly always a bailout of the HOA by the town. And the long-term unprofitability becomes glaringly apparent. In Detroit, it looks like abandoned neighborhoods. In Flint, it looks like poisoned water. And Detroit and Flint aren’t special, they just implemented these fiscally unsustainable development patterns a few decades before other cities, and indeed there are thousands of cities and towns that are already starting to look more and more like Flint.

The lack of a market feedback process produces forcibly sprawled, fiscally unsustainable cities and towns. The infrastructure-efficient urban core is downzoned, preventing any growth upward, and growth outward is heavily subsidized by flat infrastructure rates. A cul de sac might have 50 feet of street pipe per resident, whereas an apartment building might have 5 feet, but the residents in both locations pay the same. This is a subsidy to sprawl paid for by those who live densely and efficiently. Transit infrastructure is no different: Road construction can never keep pace with economic growth, and we get congestion and potholes, long commutes to where the housing is, and not enough housing where the jobs are.

The only way to begin designing our cities better is to admit that democratic socialism is very bad at city design. If there is a solution to our infrastructure woes, it is to incorporate more market feedback into the system, to avoid infrastructure boondoggles, and enable dense, efficient development. And some cities around the world show the path forward. Japanese mass transit infrastructure is a good case-in-point.

Over the past few decades, nearly all of Japan’s mass transit has been privatized. The trains are funded by fares, but more importantly, by the private rail companies’ real estate holdings. The rents from high rises constructed around the station pay for the operation of the rail line, which increases rents around the station, in a feedback mechanism. The profit/loss calculation determines how much housing construction should occur near which rail stations, and where the rail system should be expanded to next. As noted above, this has produced high-tech, high-speed trains that service nearly all of the 30 million or so folks in the Tokyo metro area.

And the rent is much cheaper, which is precisely related to the transit scheme above: In America, the socialist transit networks have very shallow penetration, with only a small fraction of the population living within walking distance of a rail stop. The trains don’t go to where the housing is, and the housing isn't built where the trains are. Because land use is decided democratically, towns won’t approve high-density zoning by train stations, and so while many transit systems own quite a bit of developable land near train stations, they aren't allowed to build on it. This means they can’t fund expansion of the rail system with these funds, and furthermore, even if you dump tons of money onto these transit systems, they don’t have the profit/loss mechanism to determine where the new stations should go.

And this is why Tokyo has futuristic trains and housing prices of around $339 per square foot, while in Boston prices are $661/sqft.  You have to be wealthy to afford one of the prized, scarce apartments within walking distance of transit, while the masses spend hours every day driving to the far corners of the metro area where housing is quasi-affordable.

The rent is too high, the commute is too long, the water is poisoned, and there are no easy answers.  But the first step is for Americans to learn from the successfully affordable and accessible cities of the world.  Ironically, these successful cities are typically more market-based in their planning decisions than the supposedly hyper-capitalist US.  Central planning for bread always produces bread lines, central planning for roads always produces congestion, and central planning for housing always produces a housing shortage and rising rents. Americans know they don’t want their bread from the government, but until the same attitude is adopted toward infrastructure, we will all be desperately waiting in long queues for stale crumbs.

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The Progressive Roots of Zoning Fri, 24 Nov 2017 14:15:08 +0000 by Samuel R Staley Before the twentieth century land-use and housing disputes were largely dealt with through courts using the common-law principle of nuisance. In essence if your neighbor put a building, factory, or house on his property in a way that created a measurable and tangible harm, courts could intervene on behalf of a […]

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Edward Bassett, writer of NYC's 1916 zoning code

by Samuel R Staley

Before the twentieth century land-use and housing disputes were largely dealt with through courts using the common-law principle of nuisance. In essence if your neighbor put a building, factory, or house on his property in a way that created a measurable and tangible harm, courts could intervene on behalf of a complainant to force compensation or stop the action. This pro-property rights approach maximized liberty and minimized the ability of citizens and elected officials to politicize the development process.

This changed with the Progressive movement. Beginning in the late nineteenth century, Progressives argued that government should become more professional. Rather than being limited, government should use its resources to pursue the “public interest,” loosely defined as whatever the general public decided through democratic processes was the proper scope of government. Legislatures and, by extension, city commissions made up of elected citizens would set policy and goals while a cadre of trained professionals would use the techniques of scientific management to implement policies. One of the leading Progressives of the day, Woodrow Wilson, was skeptical of the value of elected bodies such as Congress because they interfered with scientific management of government.

While many in the twenty-first century might be tempted to dismiss this public-interest view of government—indeed an entire academic subdiscipline, Public Choice, has emerged to demonstrate the foibles of governments and explore “government failure”—Progressive ideas held a lot of appeal at the turn of the twentieth century. In addition to national concerns over industries such as oil, steel, and railroads, local governments were rife with corruption, waste, and inefficiency. Reforms, such as the city-manager form of government, civil-service exams, and in some cases even municipal ownership of utilities, were thought to provide more transparency and accountability than the patronage-laden times of political bosses. (Today municipal ownership is associated with higher costs, less transparency, and little accountability.)

The Progressive movement, however, had another, darker side that would end up being much more important to understanding the widespread acceptance and persistence of government land-use regulation: social control. Jonah Goldberg notes in his contemporary political history, Liberal Fascism, that the Progressive movement was also a social movement. The emergence of Prohibition and immigration restrictions at the same time (during the presidencies of Theodore Roosevelt, William Howard Taft, and Wilson) was not a coincidence. Not only could government professionalize public service, Progressives believed it also should mold the community along “progressive” social norms and goals (collectively decided).

This political climate provided the context for zoning and helps explain the rapid increase of zoning and urban planning more generally throughout the United States. Conventional planning history tends to minimize the political reasons why zoning was broadly accepted, seeing urban planning instead as an application of a more scientific and rational approach to land development. Rather than letting private markets decide what housing should be built, at what heights, at what densities, and where, the “community” would decide through a combination of democratic choice (elected officials developing and approving a zoning plan and code) with professional planning and code enforcement. Ideally the zoning code would be tied to a central comprehensive plan, which would establish the “vision” for the community. Zoning would be used to implement the plan.

Importantly, zoning was a Progressive alternative to the more traditional (and conventional) nuisance-based approach. The first zoning code, for example, attempted to address spillover impacts of property development—externalities—by segregating land uses. The proverbial slaughterhouse in the residential district wasn’t a myth; these juxtapositions of “noxious” uses were common in low-wealth, low-mobility societies and communities. As incomes increased, wealthier households tended to move to neighborhoods that were healthier and safer; incomes afforded greater mobility—first with horses and buggies, then horse-drawn and electric trollies, and ultimately with the automobile. Those left behind were forced to use the courts—which required money, time, and expertise—to marshal arguments and win cases. Zoning was an alternative that promised lower costs and consistency with social goals established at the municipal level through scientific land management.

But the acceptance of zoning wasn’t all about scientific management and the implementation of the public interest. Zoning, in effect, collectivized property rights. The zone established in the code determined what kinds of homes could be built, their size, sometimes even their outward appearance, and the density of neighborhoods. Similarly, zones determined where businesses could locate. Proposals to develop property for uses not designated by the zoning code required an amendment to the zoning map or plan. The amendment process was intended to be cumbersome and laborious because the presumption was always in favor of the publicly approved plan and against spontaneous modifications based on individual initiative.

Overestimating the detail of a zoning code is difficult. Even cities of 10,000 or fewer can have dozens of zones, often a half-dozen or more devoted just to housing types. Separate zones may exist for neighborhood business, commercial office space, neighborhood retail, or regional shopping malls. While some cities and towns have adopted a “pyramid approach,” where the base of acceptable uses is broadened as land is “upzoned” (with commercial and industrial development representing “higher” zones to reflect higher densities), many have adopted “exclusive use” zones that specify in detail what uses are permitted. If your proposed use (say, a home-based doctor’s office or tax preparation service) is not listed as a permissible use, it’s illegal.

One of the consequences of adopting a zoning code is the implicit politicization of all land use by making it a community decision. The decision to “grandfather” a use (such as your home) is a political decision, not one based on private property rights. In fact there is no enforceable individual property or civil right to land use under zoning; courts have routinely upheld the legal right of cities to rezone properties regardless of the wishes of individual property owners. Citizens can object as a matter of due process but cannot challenge the substance of the regulation itself, which is presumed to serve the general welfare of the community. Zoning establishes a legal entitlement granted by government to use property in designated ways.

Thus two forces led to the rapid adoption of zoning throughout the United States in the twentieth century: concerns about the nuisance effect of incompatible land uses and the political desire to control property development. Research by political scientist David Clingermayer, published in the academic journal Public Choice in 1993, found evidence that both the market-failure and political-interest justifications were important to understanding the spread of zoning. The conventional history focuses on nuisances and the “failure” of common law. Edward Bassett, an attorney and reformer in New York City, advocated the nation’s first citywide zoning ordinance when the iconic Equitable Building was erected in Manhattan. The building was tall enough to block sunlight into neighboring buildings and properties, prompting calls to restrict the size and height of buildings. A zoning ordinance would do the trick, Bassett said, taking inspiration from European style “districting.”

The second force, however, may have been equally important, according to Clingermayer. Externalities may have prompted some actions, but the economic interests of the politically powerful were also at play. The skyscrapers popping up along Manhattan’s toney Fifth Avenue troubled upscale clothiers, who were not excited about their wealthy clients mixing it up with the immigrant sweatshop workers toiling away in the high-rises. So Fifth Avenue property owners used the political device of zoning to prevent encroachment by uses they thought were “undesirable” or could lower their property values.

The same scene played out later near industrial Cleveland, Ohio. The suburban village of Euclid was concerned that industrial development radiating outward from Cleveland would encroach on the primarily residential character of its community. So it enacted a zoning ordinance to prevent industrial development. In a landmark 1926 decision by the U.S. Supreme Court, Village of Euclid v. Ambler Realty Corp., the zoning ordinance was upheld as a proper exercise of the police powers of local government to protect the general health and welfare of the community. Ironically, in the wake of the zoning ordinance, Ambler Realty’s property lay vacant until World War II, when an aircraft factory was built by General Motors to support the war effort.

Even before the Supreme Court blessed zoning, the federal government was busy encouraging it as part of a general effort to professionalize development control. Bassett helped the U.S. Department of Commerce (under Herbert Hoover) draft a model zoning ordinance called the Standard State Zoning Enabling Act, which provided a blueprint for cities across the nation. Clingermayer notes that 55,000 copies of the report were printed and distributed during the 1920s. By 1930 800 cities, towns, and villages—covering three-fifths of the nation’s urban population—were governed by a zoning ordinance of some kind.

Regardless of the initial intent, however, the effect of zoning was to fully politicize land-use decisions, as economist William Fischel puts it in the classic, Economics of Zoning and Land Use. This was not surprising: Since zoning hinges on the control over land uses rather than free use of property, the complexity of the zoning maps and the development-approval process has increased exponentially.

Euclid’s first zoning ordinance had six districts based on classes of uses. By 2011 the village had become a city of nearly 50,000 residents with 12 zoning districts, including six residential, three commercial, two industrial, and a campus-institutional district. The initial modest control of land use quickly proved ineffective because democracies are not particularly good at predicting the future. As land uses became more complex and the impacts themselves became more diffuse and hard to categorize, zoning became more layered and sophisticated, with cities and planners attempting to anticipate and accommodate more uses. Euclid’s zoning is relatively modest by national and midwestern standards. San Antonio’s zoning districts have grown from 22 in 1938 to 30 in 1958 to 53 in 2009. New York City has adopted hundreds of zoning districts, including ten residential, eight commercial (plus overlays), three manufacturing, dozens of special districts such as street-specific designations for mixed land uses, and environmental districts such as scenic view districts.

For many cities, zoning has become a never-ending cycle of adding complexity to already complex planning procedures as existing zones fail to accommodate innovations in land use and economic development.

Is there an alternative?

While most American cities, towns, and villages have adopted some form of zoning and comprehensive planning, several counties and municipalities have resisted the Progressive call to centrally plan their cities. Chief among these is Houston, Texas, a city of 2.1 million people in the nation’s sixth-largest metropolitan area of six million. Zoning has gone to popular referendum three times (1948, 1962, and 1993) and failed. Most recently a pro-planning city councilman lost his bid to become mayor, in part because of citizen skepticism of zoning.

Despite the lack of zoning, Houston is hardly a land-development free for all. Development is regulated through three different processes. The city regulates development through an approval process that focuses mainly on the impact of land development on public services. New developments, for example, must conform to performance criteria for public services such as sewer and road capacity. The second regulatory mechanism is private restrictions on land use adopted through legally enforceable land covenants, or voluntary restrictions on future land uses by current property owners. Covenants can (and often do) exclude specific uses, such as commercial enterprises or businesses. Yet a surprising number of parcels are “unrestricted,” particularly in the older neighborhoods and sections of the city, effectively allowing informal market forces, the third mechanism, to regulate the timing, intensity, and place of development.

By avoiding zoning, Houston is able to dramatically speed up the approval process while ensuring the land market responds effectively to economic trends. Under conventional zoning securing a rezoning for a major project can take years. In Houston substantial developments such as multifamily housing can be approved through the performance-approval system and be fully constructed within a year.

All three mechanisms have effectively combined to encourage and manage the growth of one of the nation’s most dynamic cities. Houston, for example, builds housing at higher densities and closer to the traditional urban core than competing cities such as Dallas and Phoenix. Its market-oriented approach to land use has also allowed it to adapt, building multiple employment centers to accommodate new economic challenges and opportunities. While Houston was not immune to the housing market collapse, its housing market has tended to be more resilient and adaptable to changing circumstances.

In sum, many citizens of contemporary U.S. cities take the Progressive foundations of zoning and land-use planning for granted. Yet these Progressive principles on which modern-day zoning rests, and its broad cultural acceptance at the grassroots level, have helped undermine alternative ways of regulating development more consistent with individual liberty and markets. Many of those seeking to roll back federal government encroachment should also be casting a skeptical eye into their own political backyards.

Samuel R. Staley

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