Zoning can be an adaptive
control tool. It attempts to simplify, categorize and ultimately codify what
has already occurred and what is yet to take place. It is the result of a community
trying to making sense of a prohibitively complex, and constantly evolving
process. Zoning can be a static tool that tends to use the communities goals of
what makes the city healthy, safe, and prosperous from a rather small time
period. But healthy cities are dynamic, and thus the zoning process is never
fully complete. Zoning that quickly adapts can more efficiently allow the city
to evolve. Yet an overly adaptive zoning code begins to unravel the certainties
that give it much of its power and legitimacy — namely serving the interests of
existing users by protecting property values and preserving community
character. The power to preserve or adapt could be desirable to an extent, if
it actually achieved these goals at minimal cost.
Economists have long
argued that market exchange – where the choices of individuals reflect their
own values and firms make choices to maximize their profits – will lead to an
efficient allocation of scarce resources. Efficiency in this sense requires
that individual buyers and sellers cannot affect the price at which exchange takes
place in a market. In addition, markets must exist for all goods. If these
conditions are met, markets are competitive and complete and there will be an
efficient allocation of resources. In reality, these conditions are rarely met.
Sometimes the
benefits of consuming a good may not accrue solely to the consumer. Others may
also benefit. This is the case of positive externalities. Conversely, an individual
or group may not be the sole bearer of the costs of a use or the producing a
good – and a negative externality arises where the community bears a cost of
producing that particular use of good which is greater than the private cost. Even
if there are no market failures, the workings of the
economy may produce a distribution of benefits that is
perceived as inequitable. Often, this is because of the unequal distribution of
wealth and of unequal opportunities.
An externality may be said to exist
whenever a decision made by an individual or group has effects on others not
involved in the decision. That is to say, an externality occurs whenever some
activity imposes spillover costs or benefits on persons not directly involved
in the activity of interest.
Negative
externalities, or external
diseconomies, are costs that flow outside of market transactions. Noise,
air pollution, congestion, water pollution, and visual pollution, as well as blocked
or otherwise altered natural light, are examples of negative externalities that
lower (industrial) uses might impose on higher use (residential) land. Thus, with
cumulative zoning, each zone that produces negative externalities can injure the
uses in all higher zones and, in turn, can be injured by negative externalities
produced in the lower zones. A resulting problem is that, in the presence of externalities
that flow primarily in one direction, the market’s allocation of land to
various uses will be inefficient.
The kind of market failures noted above provide the
necessary conditions for public action. But public action needs to be informed when
working on the effective design of public policies.
Zoning is a complex and controversial process involving competing values. An
example is a property owner imposes an aesthetic externality on a neighbor by painting
a fence on the shared property line hot pink and the neighbor imposes a burden
on the property owner by being sensitive to the color. While most people favor reducing
negative
externalities affecting their enjoyment or the value of their property, there
is some disagreement as to what constitutes a negative externality that needs regulating. So most
people look to government intervention and the assumed consensus process to
eliminate, limit, or internalize negative externalities. In addition to looking
to government intervention to eliminate negative externalities, most people
want government to enact rules that will encourage positive externalities, such
as large yards or tree-lined streets.
ISSUES
“Externality zoning”
is zoning which is in response to the phenomenon that one person’s use of land
may have external effects-positive or negative-on the uses of neighboring land.
The City’s zoning is cumulative,
or hierarchical, all land uses are placed somewhere in a hierarchy. So called
higher uses (residential) are allowed to locate in lower use zones
(industrial), but not vice versa. This form of zoning is based on the belief
that negative externalities flow primarily in one direction, from lower to higher
land uses.
The main objective
of this type of zoning is to reduce the total social cost of externality
generating uses. For example, if a user (industrial) produces negative externalities
which affect another user (residential), then externality zoning could restrict
industrial users to a number of contiguous parcels of land reserved for such a
use. This could reduce the harmful external effects of the industrial uses by
minimizing the length of the boundary between conflicting uses. An industrial
user, such as Madison Kipp, whose residential neighbors regularly complain
about environmental issues would benefit from spatial separation and/or limited
boundaries with residential uses.
Boundary effects concern the impact that higher use areas suffer from their proximity to lower use areas. Scale effects
suggest that the quantity of land in the lower use affects higher uses equally throughout
the relevant area; boundary effects suggest that the impact is limited spatially
to a boundary strip. If negative externalities do not travel very far, then boundary
effects are the more important determinant of efficient land use.
Furthermore, the
definition of an optimal externality zoning policy is one which produces an
economically efficient (Pareto Optimal) allocation of resources. For example,
if for simplicity we neglect spatial considerations in the location of industry
and assume that land is similar in quality, the optimal policy in the above
example might segregate industry in a compact area and would locate this area
in order to minimize its boundary with residential areas.
One of the main
problems of land use is the question of the optimal use of a specific site.
This should be combined with the most profitable use of that specific site. To
address this problem the concept of the highest and best use is applied. The
most profitable use of a site will be that which provides the highest residual
to that piece of land. The residual may be calculated by subtracting the
conversion cost from the present value of that piece of land. The residual may
vary depending whether the site is used as a parking lot or a grocery store.
The highest and best use is not necessarily the most socially desirable use
because various negative and positive spillovers may arise from different land
uses. The most profitable use may be to erect a grocery store on a specific
site although it may not be the best in a social and ethical sense.
“Fiscal zoning” will be defined to mean zoning
which creates a different pattern of land use than externality zoning because
policy-makers have an objective other than economic efficiency. For example,
assume that a suburban community desires local public services of a high
quality but also desires a low property tax rate. Such a community might zone
vacant land in large lots for high-value commercial uses because it believes
that owners of commercial developments will pay more property taxes than the
cost of providing additional public services to meet their needs. In such
circumstances, the possibility that a community’s vacant land might be better
suited to apartments than to commercial uses would make no difference to the
community. It would prefer that the land remain vacant to its being used for
apartment buildings, since such a use is seen as a fiscal drain on the
community. An optimal fiscal zoning policy can be defined only with reference
to the community’s objectives but it will not in general lead to the same
pattern of land use as would an optimal externality zoning policy.
