Is Exclusionary Zoning a Good Thing?

In my last post, I criticized Judge Glock’s recent article on the relationship between suburban zoning and the national housing crisis. But Glock also makes an interesting theoretical argument about zoning that I think is worth discussing.

Glock writes: “opponents of zoning need to explain not only why local governments keep making the same mistake, but why people of all races keep moving to areas that make that mistake. More likely, zoning is common because people want it.” In other words, zoning seems to be good for the municipalities that practice it,* therefore it must be good.

But this overlooks the collective action problem caused by zoning: what is good for each municipality individually is not necessarily good for the region as a whole. Let us assume for the sake of argument that each town has an interest in using zoning to limit housing supply in order to prevent the alleged negative externalities caused by new residents (such as, for example, increased traffic). But when every municipality in a region limits housing supply, some of the results are not good for the region’s residents as a whole: housing becomes scarce, causing higher rents, causing homelessness and middle-class flight to more affordable regions.

So for example, if one small suburb abolished zoning on its own, it would have the worst of both worlds: it would suffer any negative effects caused by increased population, but its impact on statewide or regional housing supply might be too small to make the region more affordable. But if everyone abolished the housing restrictions created by zoning codes, the negative impacts of increased housing would be scattered across the region, while the positive impacts of lower rents would be more significant.

Glock also argues that zoning makes local government more fiscally stable. In particular, he writes that if local governments were not able to restrict entry, “people could get high-quality services by skimping on low-quality property with lower taxes. … allowing more free riders causes voters to reduce the total amount of public goods instead of redistributing them.” In other words, suburbs should be able to exclude the poor because if they didn’t exclude the poor, their affluent residents would be less willing to vote for public services.

One obvious response to this is that if zoning creates this kind of segregation, this is actually not such a good thing: the richest suburbs get the best public services, and central cities and poor suburbs get stuck with the worst of everything.  As a result, every suburb has a strong incentive to be as segregationist as possible, because if it doesn't, affluent residents will flee to less diverse suburbs that aren't burdened by poor people. 

Glock argues that exclusionary zoning doesn’t lead to such dismal results, because “poorer cities embrace new development … since they don’t mind the increase in congestion and crowding.” In other words, suburban exclusion creates metro areas with homogenously rich suburbs and integrated cities and other suburbs, so everyone gets a decent tax base and good public services. 

But this narrative doesn’t always fit reality, for a few reasons. First, in our nation’s most stagnant regions, residents of central cities and poorer suburbs might want new development, but those municipalities suffer so much from the effects of concentrated poverty that there is not enough demand to support much gentrification. For example, residents of Cleveland and Detroit might wish for new development, but if developers and prospective residents shun poverty-packed places with poor tax bases, they might not get very much of it.  (In fact, a recent article suggests that Cleveland's tax base has declined by 2/3 since 1960).

Second, even in a city with a significant middle class, public services are not equal to those of well-off suburbs. For example, my home town of Atlanta has some very rich neighborhoods—but I don’t think any sane person thinks that Atlanta’s schools compare favorably with those of suburbs with minuscule poverty rates.

Third, segregation is even more harmful for low-income suburbs like East Cleveland, Ohio (which has a 39 percent poverty rate) than for central cities. As Glock correctly notes, central cities at least have (or at least had, before COVID) a “strong property tax base downtown” and a few residents who valued proximity to downtown jobs—so downtown Detroit and Cleveland are nicer places than they were a few decades ago. But a low-income suburb like East Cleveland lacks these advantages, which means that no matter how much East Cleveland’s leaders want gentrification, it is unlikely to happen.

Fourth, the housing scarcity induced by zoning means that even residents of lower-income areas might be reluctant to support new development. This is especially true in expensive regions like New York and San Francisco: the combination of high demand for housing and restrictive zoning means that housing prices have risen everywhere, and so residents of poorer cities and neighborhoods sometimes fear that new middle-class residents might bid up the price of housing, pricing them out of their own neighborhoods.** As a result, even residents of poorer areas fear development, which of course reduces the regionwide housing supply even more, which of course makes housing even more expensive, causing even more gentrification-phobia.

In sum, exclusionary zoning may make a few suburbs more desirable, but I don't really think this is enough of a positive good to outweigh the scarcity that it causes.

*One obvious problem with this argument is that because zoning is virtually universal in the United States, Americans don’t really have the option of moving to an unzoned community. Even Houston, the most prominent exception, has a variety of zoning-like rules.

**Having said that, I think this view is based on a wrongheaded assumption: that in the absence of new housing, people priced out of richer neighborhoods will never come to poorer areas. But gentrifiers are perfectly capable of rehabbing existing housing, and thus gentrifying an area even if no housing at all is built.