Zoning and Affordable Housing

In early December, Minneapolis enacted an extensive reduction in the city’s zoning laws by eliminating single-family zoning. Developers will soon be able to build more densely, thereby reducing housing costs.

Economically, zoning is a disaster. Zoning designates a particular use for each parcel of land. By its very nature zoning reduces the supply of land for any particular use (such as multi-family housing).

In Minneapolis nearly 75 percent of all residents live in areas zoned for single-family homes. Even when demand for housing in the city increases, developers have been prohibited from meeting that demand by building multi-family homes. As a result, the cost of the land must be included in the price for a single home. However, if three homes could be built on the same parcel, the land cost could be divided between those homes.

In major cities, the cost for a lot can easily be $150,000 or more. This means a savings of $100,000 or more for a new home. By allowing more dense development, Minneapolis will greatly reduce the price of housing–i.e., make housing more affordable.

While the economic arguments against zoning are indisputable, the fundamental objection to zoning is moral. Zoning prohibits owners from using they property as they choose.

Under zoning, an owner cannot use his property by right, but only with the permission of government officials. He can’t use his property as he deems best, but only as politicians and bureaucrats dictate. His choices and desires are irrelevant.

One critic of the new law argues that

Yes, zoning is regulation, and yes, it can impose costs. But it also permits the existence of desirable characteristics in specific areas. People get to choose from a variety of neighborhoods.

Certainly, under zoning people can choose from a variety of neighborhoods. Certainly, neighborhoods may have different characteristics. So? Those characteristics won’t be decided by the property owners. Those characteristics will be dictated by government officials.

The economic costs of zoning are real. But the real cost is the loss of freedom.