Government Controls and Urban Development

Everyone agrees our cities are in bad shape. Everyone agrees that something has to be done. And almost everyone agrees that more money and more effort should be spent on the kinds of "solutions" which have failed in the past. I think it's time to ask whether or not we are mistaking the problems for the solutions.

Take the problem of suburban sprawl. In recent decades monotonous suburban growth has spread out from our cities and devoured the countryside in its path. This development pattern has come to be regarded as the product of largely unregulated growth. The problems of suburbanization are commonly believed to be solvable or avoidable only by more government intervention in the process. But what caused suburban sprawl in the first place? Was it natural economic and social forces—or government policy?

In the 1930's it was the government's policy, based on the "Garden City" concept, to encourage suburban development. Several decades of such policies ruined the countryside and fostered the slum conditions in our central cities. So then programs such as urban renewal were established to attempt to rectify urban problems caused largely by earlier policies. Government urban policies have been a series of attempts to cure the effects of one economic distortion by substituting another.

INTERVENTION DISTORTS

All government economic interventions are economic distortions. If a policy is economically sound, it does not require government intervention to bring it about. If it is not economically sound, making it mandatory by government regulation will not make it more economic.

What were the economic distortions which caused the rush to the suburbs? First of all, the government financially subsidized home ownership by introducing long-term tax-backed mortgages. It also discriminated in favor of home ownership by allowing mortgage interest payments as an income tax deduction.

Financial policies were not the only tools the government used in shaping our urban form. The U.S. Dept. of Commerce persuaded states to enact the enabling legislation for zoning. The local governments then got into the act and earned their share of the blame. For instance, they zoned an uneconomic amount of land for single-family residential development. By thus creating an artificial oversupply of single-family land, the suburban governments depressed prices for such land. This encouraged more suburban single-family developments.

At the same time, the supply and demand relationships for apartment land were distorted in the opposite direction. Apartment zoned land being rare, such land brought, and continues to bring, higher prices. (In outlying areas of Houston, where there is no zoning, land for apartments costs less than for single-family homes.) In zoned areas, the scarcity and high price of apartment land inevitably result in higher rents. Thus people who cannot afford a home end up paying a higher rent—courtesy of zoning ordinances enacted for their "health, safety, and welfare."

Moreover, in areas where the supply of apartments is artificially constricted by zoning, the few existing apartments have a monopoly or oligopoly on the market. Zoning protects them from the competition of a free market. There is little need to meet competitive prices or values if zoning has precluded the possibility of competitive developments in the area. This is even more evident in mobile homes, for there are many communities where there is zoning for only a single mobile home park. If that is the only place for mobile homes, the owner of that property need not be too concerned about price competition or environmental quality.

Of course, many communities do not allow any mobile homes. Generally this is accomplished by indirect means since the courts have taken a dim view of outright prohibition. Typically, local governments adopt regulations with rigid and costly standards for mobile homes to discourage them. In any case, people who prefer mobile homes, or who can't afford anything else, may find their preference foreclosed or hindered by zoning. So they must turn to more expensive housing or an older home, if available. Or else they have to commute a greater distance to someplace that allows mobile homes. Tough luck, but the folks in city hall know what's best—or do they?

LITTLE BOXES

As to monotonous uniformity of suburban areas, this results largely from the uniform restrictions with which the industry must comply. It is no coincidence that in a given area all homes have the same setbacks, are the same distance apart, are the same height, and are on similar sized lots. Such monotony is the product of regulations specifying setbacks, side yards, height limitations and lot sizes! And the effects of these regulations are not merely visual. By forcing low densities through requirements for long setbacks, large lots, etc., municipalities raised the cost of lots. They also managed to achieve such low densities that no mass transit system could economically serve such areas.

Then in order to alleviate the traffic, the government built freeways from the cities to the suburbs. This facilitated immigration to the suburbs—and added impetus to the process. Suburbanites could work in the cities and commute on the "free" traffic arteries that the city residents helped to finance. In such ways the cities were forced to subsidize their own debilitation.

There is still another issue where governmental controls influenced suburbanization. This is the issue which has influenced emigrations throughout history, including the emigration from Europe to this country. The issue is the comparative degree of freedom. People gravitate to freedom. Just as people came to America to escape the restrictions of their homelands, just as people flee from East Berlin to West Berlin, just as feudal serfs in the Middle Ages escaped to the city (where they would be free from feudal restrictions if they remained for a year), so too are people now leaving the city. Nowadays there are fewer restrictions outside. If cities do not allow mobile homes, people move out to the country. If cities do not allow plastic pipe, plastic electrical cable and other modern features, people go elsewhere. They go where there are no building codes or zoning ordinances, or at least where they are less restrictive. Much of suburban development has been a process of staying one suburb ahead of the growing governmental controls. As each suburb matures and progressively adopts the codes and other restrictions which are killing the central cities, developers and residents move further out. Meanwhile, the planners and government officials moan that they could correct everything if only they had more controls.

Controls always lead to more controls. The initial controls create economic distortions which it is said, can be corrected with additional controls. These create additional distortions, leading to more controls, etc. There are countless examples of this. The history of the entire British economy is one of the most comprehensive examples. A striking example in our own country is the railroad industry. The railroads have been strangled by ever-greater controls, each one of which was going to "save" them.

On the urban scene we can see how government controls have fostered suburban growth—at the expense of the cities—leading to the clamor for policies and controls to save the cities. We can see how government controls have raised the cost of lots, how building codes have raised the cost of homes, how zoning restrictions have raised the cost of rents, and how government manipulation of the money supply has led to the highest interest rates homeowners have had to pay on mortgages in history—leading to the clamor for rent subsidies, interest subsidies and other subsidy programs for home buyers. We can see how the low density controls have now led to the clamor for subsidization of uneconomic mass transit systems. Each set of controls has created its own problems, for which new controls are advocated—always with a corresponding drop in the freedom left to the property owners.

WHY ZONING

Zoning—which today is used to destroy property rights—originally was a reaction to the violation of property rights. Historically there were cases where factory chimneys dumped so much soot on adjacent properties that housewives dared not hang out their wash or open their windows. If they did, coal dust would settle on their wash or on everything in their homes. Such occurrences were in fact violation by the industries of the property rights of surrounding residents. The industries were using other people's property (as a dumping ground) without the owners' permission and were impairing the owners' use of their own property. Such cases were legitimate grounds for the intervention of the police power in defense of the residents' rights. Remember zoning is an exercise of police power. The proper function of all police powers is the protection of the lives and rights of citizens, including their rights to property.

Although the protection of rights furnished the rational basis for the introduction of the police power, this basis was not clearly articulated. Instead the police function was championed on the basis of protecting the public good rather than protecting private property. As a result, the police power became a means not of protecting individual rights but of subordinating them to public direction. Zoning is such a manifestation.

As with other laws, zoning laws originally specified what was not allowed, what would supposedly violate the rights of others. Laws pertaining to murder, theft, etc. do not tell a person what he must do. They tell only what one must not do. Anything not prohibited by law is within the scope of freedom. The greater that scope, the greater the development of new ideas. That is why the freest nations of the world are the most advanced and why the freest cities are the most progressive.

As zoning ordinances became increasingly restrictive, several crucial changes took place. Zoning became totally divorced from and at odds with the concept of property rights. Most of the early advocates of zoning were not champions of property rights anyway, but the grievances they raised had a valid relationship to property rights, as noted above. Though such relationships were not generally identified, the grievances received enough public attention and political concern to result in widespread acceptance of zoning. Because the link between property rights and zoning was not generally understood in the first place, nothing prevented the latter from being used to destroy the former. This is what has happened, and this is what was intended by most of the social reformers who saw zoning simply as a political tool for achieving their social objectives.

As zoning became more restrictive, zoning districts became more exclusive. Still, in the attempt to make districts more exclusive, it was not always possible to foresee and prohibit new land uses. Zoning, like other laws, is based on the past. Occasionally it happened that someone thought up a new industry or a new commercial venture (like motels) or a new type of housing (like mobile homes). Such developments got started before the cities got around to including it in their zoning ordinances. In order to keep progress at a pace the city governments could keep up with, someone got the idea that zoning ordinances should henceforth list permitted uses rather then prohibited uses. That way if anyone thought up a new use it was automatically prohibited unless and until the city got around to acting on it. The effect that approach has on progress is obvious, but it did much more than retard the acceptance of new uses. The underlying implications were much more serious. Now zoning—unlike any other police function in a free society—would tell a person what he could do rather than what he could not do. The law would tell him how to use his property. Early zoning ordinances prohibited certain uses, but many other uses were still possible. But when a zoning ordinance now permits only one use of a person's land, law has replaced the owner's mind in selecting the use for his property. On a larger scale, the function of law has replaced the function of reason in the marketplace of urban development.

NO RIGHT

Of course, replacing human choices with government decisions was possible in this issue only by acceptance of the idea that owners had no right to make the choices. Other people were somehow assumed to have rights to one's property, and the owner could only use it with their permission. An individual's right to use his own property degenerated from a right to a permission.

Rational laws, which tell a person what not to do, delineate violations to others' rights by damage to their persons or property. Examples of this are laws on assault, theft, and arson. But often zoning and other urban controls eliminate choices of the owner which would in no way damage the persons or property of others. When zoning ordinances switched from specifying prohibitions to specifying permitted uses, they abandoned any pretense that the alternatives foreclosed were, as in other laws, necessarily violative of others rights. If this were not so, there would be no justification for P.U.D. (Planned Unit Development) zoning, conditional use permits, or variances. The fact that zoning now prevented people from actions that injured no persons or property, that violated no one's rights, should have alerted people that zoning extended beyond the legitimate role of police power. Moreover, if all uses not specifically permitted are illegal in a given district—even new uses for which no district yet exists—obviously zoning today assumes that all uses except those permitted are guilty until proven innocent. The idea of assumed guilt until innocence is proven is so foreign to the development of human freedom and progress that it alone should cause us to question not only the means and goals but the very premises of such political instruments.

The extension of any law beyond the rational legitimate function of police power is the threshold beyond which these controls begin to create more problems than they solve. In the case of zoning, for example, the uniform lot and building restrictions lead to the problems of monotony and inadequate flexibility in adapting to terrain. Also, the standard land use structuring of zoning inhibits the building industry from creating balanced large scale developments of integrated uses and compounds traffic problems. Recognizing these problems created by conventional zoning, municipalities are now giving much favor to Planned Unit Development zoning. This is nothing less than complete design control. If limited design controls have been ineffective and created problems, maybe we ought to be eliminating those controls rather than surrendering complete design control to the same agencies.

P.U.D. zoning does allow circumventing some of the conventional zoning restrictions, but at least the conventional restrictions were objectively defined. P.U.D. zoning is necessarily on a discretionary, subjective basis. This makes it more susceptible to arbitrary judgment, political influence, and pressure—whether justified or not—from surrounding residents. This usually requires the developer to spend more money on rezoning efforts and public relations and makes rezoning more speculative. In addition, the absence of objective standards makes it difficult to seek remedy in the courts if an adverse decision is rendered by the municipality. Even if a favorable decision is obtained from the municipality, the developer's problem with this kind of control may not be over. He may now have the problem of being locked-in to a plan in which he has no flexibility to adjust to unforeseen difficulties, construction and financing delays, cost changes, or reappraisals of the market.

It is often said that strict controls are drawn to keep out bad developments and that they work no hardship on the good builder or developer. This is not true for several reasons:

1) Compliance may raise costs. If the company would build to the same standards without the regulations, the regulations are superfluous. But if the company adjusts to build to the regulations, a cost is involved which is ultimately borne by the consumer. If a "good" company would build to the same standards regardless of the regulations but the "bad" company would not, the purchasing public would decide whether or not such standards were worth the cost.

2) All laws are necessarily based on the past, whereas the builder or developer must always make his decisions on the future. What sold well in the past will not always sell well in the future. The needs and tastes of people are always changing. Furthermore, no matter how much governmental agencies might attempt to provide for the future, they can never be omniscient. Consequently, in spite of their good intentions they cannot possibly provide for products not yet invented or techniques not yet devised. Most people will agree that our building and housing codes were drafted with the best of intentions. But it is generally recognized that they have done more to prevent progress in the building industry than to eliminate inadequate construction.

3) Controls do not eliminate shoddy design or workmanship. They just make it harder to find. Controls merely standardize the most obvious features, the ones where the average consumer would otherwise be best able to tell the good from the bad.

4) "Good" controls do not keep out bad builders and attract good builders. Good builders are attracted to no controls. Bad builders are attracted too, but they can't stand the competition—unless they improve. Thus competition raises the whole level of the industry. In the long run, competition is the best control, the consumer's best protection, and it is self-policing. Paradoxically, bad builders may well be attracted to just the kind of ordinances intended to keep them out. This is because the good builders will be elsewhere, and the inferior builders pick up the slack. They are willing to produce whatever is necessary to hit that market since that's all they can get. But the better companies will be unwilling to perform the administrative and architectural contortions necessary for approval. They have better things to do.

The basic issue is not how to write controls or what controls to write. The basic issue is whether or not controls are the proper means of obtaining good urban development. In The Death and Life of Great American Cities, Jane Jacobs wrote:

The cataclysmic use of money for suburban sprawl, and the concommitant starvation of all those parts of cities that planning orthodoxy stamped as slums, was what our wise men wanted for us; they put in a lot of effort, one way or another, to get it. We got it.

That the government has now decided to reverse its effort and spend money in the opposite direction is not the crucial point. The crucial point is the concept that a handful of men should decide what is good for other people and then pass laws depriving them of their rights in the matter. Several decades ago this same approach was tried on the issue of alcoholic beverages. The "solution" turned out to be worse than the problem, and, fortunately, the liquor prohibition was repealed. Today, however, we still have a prohibition mentality operating in the field of urban development. That in itself is absurd, but that we should be extending the prohibitions and increasing the controls is even more absurd—especially in view of their performance record over the last several decades. In view of that record it should not surprise us that people are leaving the controlled environment of the cities and fleeing to the suburbs and the country. It should be no more surprising than East Germans fleeing to West Berlin. I am convinced that the solution to our urban problems lies not in expanding our controls so that they form a "Berlin Wall" of regulations from which there is no escape. Rather it lies in the preservation, restoration and extension of the freedom which produced the best of what we have.

Edmund Contoski has held various positions with several land development/home building companies and urban consulting firms. Because of his views on the economics of real estate today (See REASON, May 1974), Mr. Contoski has left the field and has been working this past year in precious metal investments Mr. Contoski is the author of The Manifesto of Individualism, and recently began work on another book.