Zoning may be the biggest price control you never got to vote on

Congress would never get away with this one. A law saying that in your town no more than a fixed number of homes could be built each year, that every new home had to sit on a lot of at least a certain size, that each one needed a minimum number of parking spaces, and that every project had to go through months of hearings where any neighbor could object? We would call that an outrage. We would call it central planning, and we would be right.

Now notice that for a large part of America, that law is already on the books. It just was not passed by Congress. It was passed, one ordinance at a time, by the town council, the county board and the planning commission, mostly in meetings you did not attend, about rules you never read. Folks, this is the biggest price control most families never got to vote on. And the fact that it wears the friendly label of "local control" and "neighborhood character" does not change what it does to the price of a roof over your children's heads.

The argument in five steps

Let me do this the way it should be done. State the claim, define the terms, then make the argument in numbered steps.

A price control is any rule that stops a price from doing its job. We usually think of the version where a government caps a price, such as rent control. But there is another version that works on the other side of the market. Instead of capping the price, you cap the quantity. You restrict how much can be produced. The result is the same kind of distortion with the opposite sign: prices that should signal "build more" are forced to signal "pay more."

Here is the argument.

1. Housing is a product with a very large cost that is not the building itself. It is the land and the permission to use it.
2. Zoning rules decide how many homes may be built on a given piece of land, how large they must be, and how long the approval takes.
3. When rules cut the number of homes below what people would otherwise build, existing homes become scarcer, and scarcity raises prices and rents.
4. Higher prices go first to the people who already own, and they hurt people who are trying to buy their first home, who rent, or who want to move to a place with jobs.
5. Therefore a regulation that limits supply operates as a price control that benefits owners at the expense of newcomers, and the conservative principle that people should be free to build on their own land supports changing it.

That is the thesis. Now let's walk through the mechanisms that make step two real.

Where zoning came from, and the case that blessed it

In 1926 the Supreme Court decided Village of Euclid v. Ambler Realty Co. The village of Euclid, Ohio, a suburb of Cleveland, had divided its land into districts, with different permitted uses in each. Ambler Realty owned a parcel of roughly 68 acres and argued that the ordinance, by limiting it to residential use, destroyed much of its land's value and deprived it of property without due process. Justice George Sutherland, a conservative of the era and no friend of the regulatory state, wrote the opinion upholding the ordinance. He reasoned that a nuisance may be merely a right thing in the wrong place, like a pig in the parlor instead of the barnyard. The case gave birth to the modern zoning system, which is why we call the basic form "Euclidean zoning."

Notice what Euclid really approved. It upheld the idea of separating a factory from a home, a slaughterhouse from a school. That is an old and sensible application of nuisance law, and almost nobody wants to repeal it. Where the system went wrong is in what came after the case: local governments stretched a doctrine meant to keep a smokestack away from a nursery into a toolkit for controlling who may live in a neighborhood and how much they may pay to do it.

And that brings us to an uncomfortable piece of history, because the story of zoning is not entirely clean. Nine years before Euclid, in Buchanan v. Warley in 1917, the Supreme Court struck down a Louisville ordinance that barred Black citizens from buying homes on blocks where white residents were the majority, and vice versa. The Court held that the ordinance violated the property right protected by the Fourteenth Amendment, the right of an owner to sell his property to a willing buyer. The decision was a victory for the principle that a man's right to use and sell what he owns does not depend on the color of his skin. It was brought by the NAACP, and it is one of the better moments for property rights in our constitutional history.

Here is the part that should make us think. After Buchanan, communities that wanted to keep neighborhoods separate by race did not stop. They shifted to tools that did not name race: large minimum lot sizes, bans on apartments, and restrictions on the type of house that could be built. Whatever any individual council member intended, the effect of a rule that requires a large lot is to make the neighborhood affordable only to people of means. A rule that is neutral on its face can sort families by income and, in practice, by background. I am not claiming every zoning board is a villain. I am saying that a system that lets a majority of existing residents decide who gets to join them should make anyone who believes in equal opportunity uncomfortable.

The tools that cap supply

Zoning is a toolkit, and these are the tools that matter most for price.

Minimum lot sizes. Many places require every new house to sit on a lot of a half acre, an acre or more. The effect is plain arithmetic. Here is a hypothetical, with made-up numbers. Suppose land in a fast-growing county costs $100,000 per acre. If the minimum lot is one acre, every house must carry $100,000 of land cost. If the town allows quarter-acre lots, the same acre holds four houses, and each carries $25,000 of land cost ($100,000 divided by 4). The builder, the bank and the buyer have not changed. The rule has. And the difference of $75,000 per home is the price of the regulation, paid by the buyer, at closing.

Parking minimums. Many ordinances require a set number of spaces for each unit or each square foot of a business. A parking space and its driveway take up land, and they must be paid for whether or not the tenant owns a car. Picture a hypothetical small apartment building where the rules demand two spaces per unit. The building must set aside so much land for cars that room for the units themselves shrinks, and the rent on each remaining unit has to cover the space. A family that does not own a second car, or any car, subsidizes the parking anyway.

Bans on duplexes, townhomes and apartments. In large areas of many cities, only one kind of housing is legal: the detached single-family house. A retired widow who wants to convert her basement into a small apartment for her daughter, or a young couple who want to build a cottage in the backyard, would have to ask permission, and often be told no.

Permit delay. This is the quiet killer. A builder who must wait a year or two for approvals carries the land, the interest on the loan and the consultants during all that time. The cost does not vanish. It gets added to the price of the house. Delay also favors big developers with legal departments over small builders and the family that wants to put up a modest home. Every hearing is a chance for a neighbor to object, and an objection is often all it takes.

Each of these rules has a cause someone can defend. Together they act as a limit on supply. And remember the lesson of I, Pencil and the price system, how nobody plans your breakfast: prices carry knowledge, and when you suppress the signal that says "this place needs more homes," you do not get the homes.

What the rule looks like when it is absent

The standard example is Houston, a city of millions that has never adopted conventional zoning. Voters there have rejected zoning proposals in referendums more than once. That does not mean Houston is a free-for-all. It relies on deed restrictions, which are private covenants that neighbors agree to when they buy, and it has rules on things like minimum lot sizes in some areas, setbacks and parking. But it lacks the district-by-district control over use that most cities have, and builders there can generally put up townhomes and apartments on land where other cities would say no.

I'd caution you about overselling the example. Houston has plenty of other things going on, including a strong job market, and the city has its own regulations, so it would be dishonest to pretend one variable explains everything. What I will say is that Houston shows something important: a big American city can function, grow and allow a wide variety of housing without a rigid zoning map. The idea that you must have a map drawn by a commission or the whole place will turn into a landfill next to a nursery is not borne out. Private contracts and nuisance law do a great deal of work.

The neighbors' best case

A fair argument starts by stating the other side at its strongest. The neighbors say something like this:

"We bought here because of the quiet, the schools and the traffic, and we paid for those things in the price of our home. Our home is the largest purchase of our lives. Now you want to let a developer put an apartment building next door and tell us it is about freedom? Zoning is the bargain we relied on. And local control means the people who live here, who will bear the congestion and the burden on the schools, get a voice in what happens."

That is a serious argument and it deserves respect. Homeowners did rely on the rules. Traffic is real. A genuine nuisance, a factory belching smoke or a bar open at four in the morning, is a legitimate reason to regulate, and Euclid is right that some things do not belong next to others. And local decision-making is, in general, a conservative value.

The property-rights answer

Here is the answer, and I'll make it in three parts.

First, the neighbors' reliance interest is real but it has a limit. Your property rights protect your use of your own land. They do not give you a right to control what your neighbor does on his land, short of causing a real harm to you. A new house next door that blocks no light and pollutes nothing is not a nuisance. The mere fact that it brings a new family to the street is not a harm that the law should recognize. If it were, no neighborhood could ever welcome a new resident, and the first homeowner on the block would hold a veto over everyone who came after.

Second, zoning is a transfer, and we should say so. When a town prohibits a landowner from building what the market wants on his own land, it lowers the value of his property and raises the value of everyone else's. The landowner who wants to build is the one who bears the cost. We have a name for a government that reduces what an owner can do with his land: a regulatory taking. The courts have been cautious about recognizing it, but the principle behind the Fifth Amendment's takings clause, that private property shall not be taken for public use without just compensation, is the same principle. For the related debate about government power over land, see Kelo v. New London and the Backlash That Reached Statehouses Nationwide.

Third, local control is a conservative value, but so is the individual's freedom against the majority. The Founders' whole design was built on a fear of a majority using the machinery of government to take advantage of a minority. A zoning board that lets a majority of existing homeowners decide what a minority of would-be builders and would-be residents can do is exactly that machinery. Local control means something when the locals are free to choose. It means something quite different when the locals are the only people in the room, and the people who need a home are not.

What to change

You do not have to burn the zoning code to fix this. Here is a conservative reform list, short and concrete:

1. Make duplexes, accessory dwelling units and townhomes legal by right in more places, which means no hearing is required if the project meets the written rules.
2. Eliminate parking minimums and let builders and lenders decide how much parking a project needs.
3. Shrink minimum lot sizes, so that land is not forced into the largest possible package.
4. Set a shot clock on permits: if the government does not decide by a date, the application is approved.
5. Make a clear separation between true nuisances, which should stay regulated, and aesthetic preferences, which should not decide who may live where.

None of these requires a federal program. Most can be done by a state legislature or a city council tomorrow, and several states have already moved in this direction. Check your own state legislature's website for the bills under consideration. The principle is one conservatives claim to love: if it is your land and you are not harming anybody, you should be allowed to build on it. And to see what else is driving up costs at the register as well as on the deed, read Regulation protects us, so why count the cost? Because someone pays it and a mortgage worksheet that shows what two points of interest really cost.

The verdict

Zoning began as a defense against the smokestack. It has become a defense against the neighbor. A family that earns an honest living and cannot buy a home in the town where its job is has been priced out by a rule that most voters never read. That is not fair, it is not conservative, and it is not common sense. Repeal the worst of it, and let the people who want to build, build.

The bottom line

• A limit on how much housing can be built works like a price control: it keeps supply short and prices high, and the loser is the family that is trying to get in.
• Check your own town's code for minimum lot sizes, parking minimums and bans on duplexes, which are usually posted online. Then you will know what your local rules cost.
• Show up at the planning commission. The people who attend hearings are mostly existing homeowners, and a few voices for more homes can change the outcome.
• Ask your state legislators about by-right approvals, shot clocks and parking reform. These reforms respect local government and still free up building.
• Support nuisance rules that protect against real harm, and oppose rules that exist only to keep new neighbors out.