The stir created by the publication of Bernard H. Siegan's now-classic paper "Non-Zoning in Houston" two years ago this month continues to grow. Recent months have seen the publication of two further articles on zoning, both by lawyers and both arguing for outright repeal of zoning laws.
The first, by David J. Mandel, appeared in the December 1971 issue of THE ARCHITECTURAL FORUM. Mr. Mandel, formerly a policy consultant at the Hudson Institute, examined specifically the New York City comprehensive zoning code of 1916, which became the model for most subsequent municipal zoning laws. He traces the history of New York's construction since the code was enacted, showing how the inflexibility of zoning and its tendency to look to the past rather than to the future for solutions are reflected in countless ways in today's buildings and neighborhoods.
Mandel challenges zoning's claim to fairness, pointing out that "zoning grants to a local majority the right to exclude, which is the essence of ownership." He also deflates the major theoretical justicication for zoning—the problem of externalities or "overflowing uses," by pointing out the inefficiency of dealing with questions of nuisance by "quarantining the patient instead of trying to cure the disease." On the alleged need for zoning because of complexity, Mandel writes, "To argue that the huge size and complexity of modern cities makes imperative the imposition of zoning is quite untrue. The larger and more complex the ecosystem the less likely that it can be controlled by plans set years before."
While Mandel's article is probably the most concise and quotable summary of the case against zoning yet to appear, a more detailed article is available, complete with 122 valuable references. This is the recent article in the SOUTHERN CALIFORNIA LAW REVIEW by John M. Ross. Ross examines the various uses to which zoning is typically put. He questions the usefulness of zoning as a means of dealing with externalities and shows how, in addition to this function, zoning "is often an instrument for discrimination and injustice. It is utilized to achieve economic segregation and the exclusion of minorities from well-to-do suburbs, to manipulate commercial activities in communities, and to shield existing enterprises from competition." Each of these points is discussed in detail, and the reader is referred to numerous legal cases and review articles for further details.
In addition to discussing both the practical and theoretical faults of zoning, and the positive harms it creates, Ross presents a critical analysis of the theoretical and legal assumptions underlying zoning, and finds them wanting. Finally, based on the experience of Houston, Ross presents the case for an alternative to zoning—a system for protecting property based on restrictive covenants. The proposed system would accomplish the legitimate objective of zoning, internalizing the costs of externalities, without imposing the onerous social costs and rights violations inherent in zoning. Ross' article is a powerful arsenal of intellectual ammunition in defense of voluntary, contractual social relations.
• "Non-Zoning in Houston," Bernard H. Siegan, JOURNAL OF LAW AND ECONOMICS, April 1970, p. 71.
• "Zoning Laws: The Case for Repeal," David J. Mandel, THE ARCHITECTURAL FORUM, December 1971, p. 58.
• "Land Use Control in Metropolitan Areas: The Failure of Zoning and a Proposed Alternative," John M. Ross, SOUTHERN CALIFORNIA LAW REVIEW, Vol. 45:335, 1972, p. 335.
UNDERCUTTING THE FHA
When the Depression wiped out many companies that insured home mortgages, the federal government set up the Federal Housing Administration (FHA), which soon pre-empted the field. By the late 50s, however, the FHA's red tape and rigid rules caught up with it, in the form of aggressive competition. A Milwaukee lawyer named Max Karl noticed that the FHA's ceiling of 5% on the allowable interest that lenders could charge on FHA-insured mortgages was far below the free-market level, thereby artificially restricting the number of loans made. Sensing a profit opportunity, Karl founded Mortgage Guarantee Investment Corporation to insure mortgages at free-market levels.
To compete successfully with the federal government, MGIC had to do its homework carefully. Karl first had to spend years convincing state legislatures to repeal laws forbidding private companies from insuring mortgages. Today only New York still prohibits MGIC-type operations. Karl also had to develop operating procedures that would provide reasonable security, but without FHA-type red tape. Today MGIC provides 24-hour turnaround on home loan insurance, compared with the FHA's minimum of one month. Together MGIC and its seven competitors now handle about 50% of what was formerly the FHA's monopoly business.
If the future growth of private mortgage insurance is anything like that of the last 10 years the FHA's days could well be numbered.
• "Karl the Magic Man," TIME, 17 January 1972.