Serious investment thinking that doesn’t take itself too seriously.

HOME

LOGIN

ABOUT THE CURIOUS INVESTOR GROUP

SUBSCRIBE

SIGN UP TO THE WEEKLY

PARTNERS

TESTIMONIALS

CONTRIBUTORS

CONTACT US

MAGAZINE ARCHIVE

PRIVACY POLICY

SEARCH

-- CATEGORIES --

GREEN CHRONICLE

PODCASTS

THE AGENT

ALTERNATIVE ASSETS

THE ANALYST

THE ARCHITECT

ASTROPHYSIST

THE AUCTIONEER

THE ECONOMIST

EDITORIAL NOTES

FACE TO FACE

THE FARMER

THE FUND MANAGER

THE GUEST ESSAY

THE HEAD HUNTER

HEAD OF RESEARCH

THE HISTORIAN

INVESTORS NOTEBOOK

THE MACRO VIEW

POLITICAL INSIDER

THE PROFESSOR

PROP NOTES

RESIDENTIAL INVESTOR

TECHNOLOGY

UNCORKED

Time to end zoning across the USA

by | Jan 13, 2025

The Analyst

Time to end zoning across the USA

by | Jan 13, 2025

An old doctrine of municipal control, embedded in a 100-year-old court case out of Ohio (Euclid v Ambler Realty) established separation of uses. That was perfectly fine in an era which needed a municipal tool to, say, separate hazardous and noxious manufacturing fumes from residential housing or retail shopping.

But it’s a mostly vestigial relic of a time in our nation when that mattered. Today, few industries produce unabated toxic waste, and less than 13% of our workforce manufacture anything physical, and certainly not in most major metropolitan areas. Today, basic health and safety standards cover the increasing rarity of old manufacturing and industrial processes.

In today’s society, we value the integration of uses, aka mixed use that reduces environmental impact and commuting time. The contemporary approach to better communities is to integrate live, work, shop and play in close proximity to enhance lifestyle, eliminate car trips and their concomitant emissions, and achieve land use efficiency with greater density.

In fact, zoning land use regulations, with minimum lots, minimum setbacks, maximum heights, minimum parking, and even minimum sized buildings are the principal reason that our nation does not have an adequate supply of housing. While residential zoning makes up the largest component of all zoning categories in most metropolitan areas (i.e. 81% of the San Diego area is zoned residential), it is stuck-in-the-mud, implacable single-family zoning that takes up most of this land. It is coveted by its beneficiaries, the more monied classes of our society who are highly resistant to change. As a result, change requires extraordinary political effort and funding over a long period of time. Mostly, zoning laws have been unpliable, if not untouchable. This makes the move to more efficient housing involving higher density a slow, cumbersome and political process.

We are a transforming society in another way: much of our commercial development needs resuscitation. Pick your poison, whether it be shopping centres, whose stick and bricks have been under assault by online retailing for years, the result being an excess of shopping centres and strip retail that are top candidates for adaptive reuse. Often they are converted to residential use, while some become self-storage, or more recently paddleball courts and more novel uses.  Meanwhile, the crash of commercial office space demand, a tragedy accelerated by the pandemic, will never recover to its prior occupancy levels at least in traditional office space. There are three main approaches to an empty office building: hang in there with lower revenues (the combination of high vacancy and lowered lease rates), convert it to another use such as residential, or tear it down and build something else.  A fourth alternative is abandonment aka stranded assets, which no city wants to witness. The initial obstacle to making any conversion happen is the fact that the commercial built environment sits on “commercially” zoned land.

That hubris that we are able to envision appropriate proportions of perpetual land use divisions needs to end.

The right of first arrival

Decades ago, I recall a fellow student’s inquiry to our planning professor, asking, “we appreciate all of this urban theory you’re teaching us, but we have to get a job when we’re out of school, so when are you going to teach us about zoning?” Our professor gave this a moment of thought and then answered the question in this way: “There is only one thing you need to know about zoning. Zoning is the right of first arrival.”

In other words, he who gets here first makes the rules, just as history is written by the winners. Never mind that these old zoning codes reflect a snapshot of a community that no longer exists. It strikes me as phantasmagorical that the U.S. Supreme Court heard and approved the Euclid case back in the 1920’s, and then didn’t hear or pay attention to any other zoning matter for a period of over 50 years.  Our way of life was never going to change or so it seemed, and the result ever since has been a sort of patchwork approach to addressing contemporary land use needs, one case at a time or one neighbourhood business plan with lawyers and lobbyists, and NIMBYs (Not In My Back Yard) as the main actors.  If anything, these codes have become more complicated and thus more entrenched against change.

The beneficiaries

So, who, if anyone is against a more dynamic market system?

Planners and bureaucrats: put bluntly, people like to keep their jobs. All communities have large departments dedicated to processing land use change. They are the holders of the keys to the kingdom, and they are entrenched. The irony is that they spend much of their time processing exceptions to the zoning code, exceptions being changes of use.

The rational thing to do would be to throw away the book. Or at least make it much skinnier. A planner’s approach to a market problem or development request is to find a zoning way to put a round peg in a square hole. Planners creatively apply “go arounds”, exceptions often dubbed “overlays” or special mixed-use exceptions to accommodate new type of development concepts.

Wouldn’t it be easier to just throw existing zoning laws out, start over again, accept that land uses are changing and will continue to change, and let the games begin?

Policy makers: We usually elect our national leaders on a platform of change. Conversely, we mostly elect our local leaders – Mayors, Councillors, County Commissioners, Alderman, Supervisors – on a platform of “no change” and preserving the status quo and character of the region. There is an inbred constituency to not change our neighbourhoods, nor raise our local taxes.  

Change scares people. Politicians know this. Most are reluctant to try something different and, in the land use world, this means not tampering with the zoning code.

Lobbyists: there is a sub-political class of people who make a living off of the complexity of zoning. They include lawyers, planning consultants, retired planners and all people who have managed to understand the complexities of the system, and prosper from it.  For full disclosure that includes the author of this piece when my firm conducts economic, market and feasibility studies, fiscal impact studies and the like in an effort on the part of our developer clients to make the argument for approving their projects.

Nimby’s and neighbours: When a person buys a home they have a “Kodak moment”.  That person has taken a mental snapshot of the neighbourhood that they just bought into and implanted deep within their cortex.  Flash forward 40 years later: they don’t want to see or experience any change. It is an emotional, even a visceral thing. Although they know, rationally, that the world has changed, and so too has their community, emotionally they fight against it, longing for the days of old, when children could play unsupervised outside. This mentality is the basis for the NIMBY movement which has been highly effective in blocking new land use types, configurations and density in major metropolitan areas. Some NIMBYs are actually BANANAs, Build Absolutely Nothing Anywhere Near Anyone.

Now, admittedly, there are other reasons for the lack of progress in the contemporary development business. Certainly, in California we have CEQA, the California Environmental Quality Act, which has been bastardized from its original cause – e.g.  saving the environment – to become the “go-to” weapon tool of the opposers and their legion of attorneys fighting against any new economically feasible development. They presume all developers are billionaires who want to create upscale utopian communities right next to their homes, with free and open amenities, and without any concern for profit margins, time to complete or market risks.

Throw out the books

Any reform that could enhance housing affordability, the political hot potato of the day, begins with zoning laws or the modification of such. If we are honest, we must recognize that the old way of doing things is not working. So, what should replace zoning?

First, communities should just throw away the old zoning books. Just eliminate the codes. This sounds like urban blasphemy, but you must start somewhere. In 1972, Bernie Sagan, a land use attorney and professor, wrote a book entitled “Land Use Without Zoning”, so admittedly the idea of eliminating zoning is not new.  Bernie wrote this book based on his experience and observations in the City of Houston, which famously has no zoning. At least no zoning per say. They have lots of covenants and restrictions, and ways to regulate obnoxious things. But not zoning.

Back then, in the 1970s, I often argued with Bernie (who in the later stages of his career became a law professor in my hometown of San Diego at the University of San Diego). I would defend my planner brethren by suggesting that zoning was necessary in a civil society, to keep a kind of land use order.  Bernie would argue and write that things were not worse in Houston without zoning. In fact, he made a case for the extraordinary progress and prosperity in Houston – without it. I would argue that the Houston story was not transferable. I was a Luddite.

When Bernie and I were having this debate back in the last century, the context for discussion was that of rapidly growing suburbs. New community and suburban development characterized the type of growth and development which defined the last half of the 20th century.

What defines our urban systems today is very different. Single family zoning is inefficient and environmentally repressive. It gradually must give way to denser housing. Building more housing is the only way to address our nation’s housing needs in a world where longevity books are the hottest holiday gifts for those over 70. Every other land use revisionist approach is just biting along the edges.

And we do not get from here to there without opening the doors to a faster, hands off approach to development. I want to emphatically state that I am not arguing for no rules. In fact, we have and need rules. We need rules to provide backbone infrastructure and services. We need health and safety rules. We need to ensure adequate transportation systems and to coordinate all the future types of land uses required, some of which do not exist yet.

But we don’t need zoning. We don’t need its redundancy, its overruling influence, its very unnecessariness. It’s time to throw away the zoning codes and start over.

About Gary London

About Gary London

INVESTOR'S NOTEBOOK

Smart people from around the world share their thoughts

READ MORE >

THE MACRO VIEW

Recent financial news and how it connects across all asset classes

READ MORE >

TECHNOLOGY

Fintech, proptech and what it all means

READ MORE >

PODCASTS

Engaging conversations with strategic thinkers

READ MORE >

THE ARCHITECT

Some of the profession’s best minds

READ MORE >

RESIDENTIAL ADVISOR

Making money from residential property investment

READ MORE >

THE PROFESSOR

Analysis and opinion from the academic sphere

READ MORE >

FACE-TO-FACE

In-depth interviews with leading figures in the real estate/investment world.

READ MORE >