Should we use zoning to preserve manufacturing?

Deindustrialization has wreaked havoc across many American cities and towns. One only need visit the landscape of the rust belt, places like Buffalo, Detroit or Flint, Michigan to get a sense how damaging this transformation can be. Behind the ugly ruins of abandoned factories and shuttered stores are the lives of real people who have suffered. Manufacturing provided jobs, good paying ones at that, that helped create a blue collar middle class.

It should come as no surprise then that some localities would try to help keep manufacturing firms within their confines. A variety of strategies have been employed including the use of land use controls such as zoning. Zoning originated in New York City as a tool to protect wealthy landowners on the Upper East Side from the noxious pollution emanating from the then spreading eastward factories of the garment district. Zoning now often doubles as an economic development tool because manufacturing zones forbid the development of other land uses such as commercial or residential. Due to changes in technology many manufacturing industries no longer need to be in the middle of the city. These industries can often operate more cheaply on the outskirts of the city, in small towns or overseas. In contrast, many people want to live in the middle of the city and many commercial enterprises need to be there too. Consequently, residential and commercial users will typically pay more for land than manufacturing users.

Without government intervention commercial and residential businesses would outbid manufacturing businesses for most urban land. By zoning land exclusively for manufacturing, these industries are in effect being protected from competing uses.

Consequently, when planners plan to upzone a manufacturing area so that other uses can operate there, many see this as the death knell of manufacturing in these same neighborhoods. Opponents of upzoning argue that manufacturing jobs pay well and are one of the few remaining avenues to upward mobility for the less educated. Moreover, preserving the manufacturing base in a city that is undergoing a shift towards service industries can be a prudent way of maintaining a diverse economy.

But there are costs associated with keeping areas zoned exclusively for manufacturing in cities like New York. The most common counter argument is that it economically more efficient to allow the market to determine the highest and best use of land. Households that would have lived in the upzoned residential properties will probably seek housing in other neighborhoods, driving up housing prices in those places. Commercial and retail establishments that might have opened in upzoned areas may also instead locate in other neighborhoods, driving up property costs in these other neighborhoods. Or quite possibly, these establishments might not open at all, depriving the city of the ensuing jobs and tax revenues.

The costs associated with maintaining zoning exclusively for manufacturing do not necessarily tip the scales in favor of upzoning. If a city prefers more manufacturing to housing, that is a political choice to make. Using zoning as a tool to preserve manufacturing, however, makes it difficult to see exactly what the tradeoff is. People know that if an area is upzoned they will likely lose the manufacturing use and gain whatever use comes in its place. But the costs associated with this decision are not readily apparent.

If a city wants to help manufacturing industries stay within its confines it would be better to directly subsidize the industry. This way the polity would be clear in the costs associated with keeping these industries in the city. Subsidizing industry would be part of the annual political battles over the budget. This can be messy and there is no guarantee that manufacturing industries would continue to receive support. It would be difficult to decide just how much subsidy to provide. But democracy is messy. If planning is about promoting democracy we should be in favor of as much transparency as possible.

Zoning that would allow manufacturing and other uses (this would only apply to manufacturing that meets performance standards that make it compatible with residential or commercial uses) would satisfy proponents of allowing the market to determine the highest and best use of land. But by providing direct subsidies to manufacturing, the harmful effects of the market could be blunted, if citizens believe it is worth the costs.