As Edward Glaeser wrote in his classic Triumph of the City, urbanisation is arguably the greatest economic growth-creator in history. Zoning regulations and their trends have been central to the idea of urbanisation and the quality and nature of urban growth.
In the latest edition of Works in Progress, Samuel Hughes has a fascinating account of the downzoning movement that gripped western cities, specifically their suburbs, since the turn of the 20th century.
In 1890, most continental European cities allowed between five and ten storeys to be built anywhere. In the British Empire and the United States, the authorities generally imposed no height limits at all. Detailed fire safety rules had existed for centuries, but development control systems were otherwise highly permissive. Over the following half century, these liberties disappeared in nearly all Western countries. I call this process ‘the Great Downzoning’. The Great Downzoning is the main cause of the housing shortages that afflict the great cities of the West today, with baleful consequences for health, family formation, the environment, and economic growth… The Downzoning is one of the most profound and important events in modern economic history…
The Downzoning was extremely pervasive in existing suburbs, where it tended to raise property values by prohibiting kinds of development that were seen as undesirable… The general pattern is that the Great Downzoning was driven by interests more than by ideology. The Downzoning happened where it served the perceived interests of property owners, and failed to happen where it did not… in the great cities of the West, the housing shortage that the Downzoning has created may prove to be its undoing. Anti-density rules now reduce property values in these places rather than increasing them, and there is growing evidence that property owners opt out of such rules when they have the opportunity to do so.
In European cities before the 19th century, the elites were concentrated in city centres, with suburbs being unplanned and impoverished. In fact, the city centres were fortified to physically cut them off from their suburbs. Low-density suburbs started emerging in some cities when developers began developing entire suburban neighbourhoods. Thanks to rising urbanisation, growth of capital markets, better roads, arrival of suburban railways, buses, and trams, improved policing, reform of feudal land tenures, and the demolition of city walls, suburban growth took off globally in the 19th century. The broad shape of development control regulations emerged in the form of privately enforced covenants.
Suburb developers tried to safeguard neighborhood character through imposing covenants. This episode forms a fascinating prequel to the Great Downzoning, so much so that we might think of it as a ‘First Downzoning’ or ‘Proto-Downzoning’. A covenant is a kind of legal agreement in which the homebuyer agrees to various restrictions on what they can do to their new property. Covenants generally forbade nearly all non-residential uses, as well as forbidding subdivision into bedsits or flats. They frequently imposed minimum sales prices, and in the United States, they often excluded sale or letting to non-white people. In all countries, they often included explicit restrictions on built density. Most covenants were intended to ‘run with the land’, binding not only the initial buyer but all subsequent ones too… They were used in all English-speaking countries, and similar mechanisms existed in France (servitudes in cahiers des charges), Germany (Grunddienstbarkeiten), the Low Countries (erfdienstbaarheden), and elsewhere (e.g. Italy, Spain, Scandinavia)…
Covenants became more elaborate over time, and by the early twentieth century they sometimes included provisions on such matters as where laundry could be hung and what colours joinery could be painted in. Developers would not have imposed covenants if they had not expected them to increase the value of neighborhoods, so their pervasiveness reveals a widespread demand for development control among nineteenth-century people. But they were not very effective. One problem concerned whether courts would enforce them… Covenants fall under private law: breaking one is not a crime, and the state will not prosecute it. Enforcement thus requires a private lawsuit, which was and is expensive… To secure the development in perpetuity, covenants had to apply not only to the initial homebuyer, but to all future ones – people with whom the developer would never have any direct dealings, and who might indeed live long after the developer’s death… The upshot of all this was that covenants were usually a weak kind of development control, which disintegrated upon contact with serious demand for densification.
The adoption of zoning regulations by public authorities began in the final years of the 19th century in Germany and Austria-Hungary
The key innovation was ‘differential area zoning’, whereby different areas within a given jurisdiction were subjected to different building restrictions… After a couple of decades of experimentation, the 1891 Frankfurt zoning code caught the imagination of municipal governments across Central Europe. It was swiftly emulated. By 1914 every German city had a zoning code, and many had gone through multiple iterations, usually with progressively lower densities. In existing elite suburbs, these zoning codes tended to effectively duplicate the content of developers’ covenants, but because they had a stronger legal basis and were enforced by the state, they were far more effective… Virtually every wealthy suburb that existed in 1914 retains its suburban character today…
The example of Germany and Austria was quickly followed abroad. The Netherlands introduced a kind of zoning system in 1901. Italian cities began to follow suit before the First World War. Japan began to introduce a zoning system nationally in 1919, albeit one that continued to permit fairly high densities. Poland introduced a national system in 1928. American and Canadian cities started introducing zoning systems in the 1910s, which became widespread in the course of the interwar period. Zoning provisions began to be introduced in interwar Australia and were consolidated in the 1940s. Britain and France followed relatively late… and robust national systems were not introduced in either country until the 1940s. In broad terms, the Great Downzoning was in place by the 1950s, though density restrictions continued to be tightened in the following decades in many countries.
The emergence of the downzoning movement benefited from a confluence of factors. It coincided with rapid urbanisation that had created squalor and unhygienic conditions in urban neighbourhoods. Public health systems failed to keep up with the urban growth. Among large elite groups, cities continued to be seen as parasites on the rural producing areas. Commoners and planners saw lowering density as the solution, with the latter proposing no more than 12 dwellings per acre. Governments stepped in to support urban diffusion (through lower density) by subsidising public transport, restricting mortgage subsidies to lower densities, creating common spaces and gardens, and so on. Amidst all these, as mentioned above, zoning regulations emerged to sanctify downzoning.
Perhaps the most important reason for the success of the downzoning movement was that it did not have the legacy of zoned suburbs with their powerful, entrenched interests to overcome. Most importantly, the zoning regulations increased land values by formalising development control in those areas. In other words, the downzoning movement was the emergence of the zoning regulations themselves, starting with low-density.
The only real downzoning requirement was on greenfield land, where the zoning regulations sought to suppress density. However, in these areas, the landowners and developers opposed and overcame restrictive zoning regulations. This was especially pronounced in Southern Europe - Spain, Portugal, Italy, and Greece. In all these places, densities started falling only in the late 20th century, on the back of market forces. In Germany and France, too, greenfield developments continued to have higher densities.
Hughes points to an important takeaway about the downzoning movement.
We are confronted, then, with a striking contrast: nearly total success in downzoning existing suburbs, and nearly total failure in downzoning greenfield development. This contrast casts doubt on the idea that the downzoning was driven by the will of planning elites. Another context in which planners struggled to lower or even cap densities was in city centers. Many American city centers declined in the decades after the Second World War due to rising crime and traffic congestion, while densification was prevented in some European centers by architectural conservation laws. But in places where neither of these factors applied, densification of city centers continued apace, reaching some of the highest floorspace densities ever attained. Many Australian and Canadian cities are particularly clear examples of this, though there are also cases elsewhere. Again, this is puzzling for the ideas-driven theory of the Great Downzoning: in places which lacked an owner- occupier lobby for restrictions on densification, planning ideology seems to have been ineffective.
Since the middle of the century, as urbanisation has progressed, there has been a shift towards higher densities. Hughes points to the paradox of the favourable views on densification among officials co-existing with lower density views among the current landowners.
From the 1960s onwards, the intellectual tide began to turn in favor of density, and by the 1990s, density was wildly fashionable again… Every planning school in Britain teaches its students the importance of density, walkability, and mixed use… There have been huge increases in the populationof virtually every British city centre since the 1990s, enabled and fostered by a range of public programmes… virtually none of this increase has taken place in private suburbs. Instead, it has been concentrated in former industrial or logistics sites, in city-centre commercial areas, or in social housing, which the authorities regularly demolish and rebuild at greater densities. Towns without much of this, like Oxford and Cambridge, have stable or even declining populations in their city centres…
All over the West, urban density is valued by planners and officials. Governments pursue it, and have had some success in enabling it in industrial and commercial areas and through the redevelopment of public housing. In the United States, densification is the central theme of a vast YIMBY movement. But progress on densifying owner-occupier suburbs has been extremely limited, and the vast suburbs of the nineteenth and twentieth centuries remain almost untouched. The unified opinion of the planning and policy elites has proved ineffective in the face of homeowner opposition. If the idealist theory were the whole truth, and the Downzoning was purely the creation of planners, this would be extremely strange.
The article points to the general preference for lower densities among households.
When people buy a home, they care not only about the home itself, but about the neighborhood in which it stands. This was why nineteenth-century developers started building whole villa colonies and streetcar suburbs rather than just individual houses… All else being equal, many people prefer neighborhoods built at low densities. Some of the perceived advantages of low density will apply virtually anywhere, like quieter nights, greener streets, more and larger private gardens, and greater scope for social exclusivity. Other attractions are more specific to certain contexts. Where urban pollution is bad, people seek suburbs for cleaner air. Where crime is high, suburbs are often seen as a way of securing greater safety. In eras with high levels of racism and increasing racial diversity, people moved to suburbs to secure racial homogeneity. Restrictions on densification were a way of preserving these ‘neighborhood goods’ in perpetuity. The prevalence of covenanting constitutes extremely strong evidence that suburban people wanted this. Covenants were imposed by developers, whose only interest was in maximizing sales value. They judged that the average homebuyer valued the neighborhood goods that covenants safeguarded more than they valued the development rights that covenants removed.
But such a preference must also be seen against the increased value extraction from properties due to upzoning.
For example, residents of the London neighborhood South Tottenham recently persuaded their local councils to let them double the height of their houses. All properties in the neighborhood enjoyed an immediate boost in value once the council agreed. In South Korea, some neighborhoods are allowed to vote for much larger increases in development rights. This generates abundant value uplift, as a result of which residents of such neighborhoods nearly always vote in favor. In Israel, apartment dwellers can vote to upzone their building: this has proved so popular that half of the country’s new housing supply is now generated this way.
Hughes makes the point that while initially, downzoning was attractive since “the neighbourhood goods it secured were more valuable than the floorspace it precluded”, but as cities developed and property prices rose, “the development rights lost through density controls to retain neighbourhood values became steadily more valuable”.
Making the principled case for density is useful, but unlikely to be sufficient: principled argument did not make the Downzoning, and it probably won’t unmake it either. Instead, campaigners should consider ways in which the changing structure of homeowners’ interests can be mobilized in the cause of reform. The examples of South Tottenham, Seoul, and Tel Aviv suggest that homeowners may be vigorous in pursuit of upzoning when they realize how much they stand to benefit from it. There is no reason why this could not be replicated elsewhere.
This utilitarian and instrumental view of zoning regulations contrasts with the argument that they emerge from ideological principles.
In this regard, the trajectory of the downzoning trend may be typical of the many large systems that we see in our lives.
These systems have unregulated (or less regulated) and disorderly beginnings. With time, people mobilise coalitions to formulate norms and then rules to bring order to the system. This creates value and attracts more interest and people to the system. Most often, the lead in this process is taken by an emerging class of beneficiaries from the dynamics triggered by the unregulated system. In due course, these winners will find ways to entrench themselves. They will seek to perpetuate and tighten the rules, in the process further benefiting themselves (and excluding others).
This equilibrium gets upended only when either the benefits of switching to another set of rules become more attractive for the winners, or the coalition of those adversely impacted by the rules gains the upper hand over the incumbent winners, or the social costs become egregiously prohibitive. If either (or a combination) happens, it triggers a competing dynamic that creates a new set of rules. These rules invariably promote the interests of the competing group and create a new set of winners.
In the case of zoning, regulation (and downzoning) allows the landowners to create neighbourhood goods that increase the value of their properties, and then appropriate all the value by opposing any proposal that would expand supply. The localised nature of decision-making on zoning regulations promoted the NIMBY movement. This persists till the property prices rise so high that building more on the same land becomes financially more attractive.
In some ways, this is the dynamic of any kind of regulation, from occupational to industrial licensing, restrictions on capital to trade, protection of the environment to labour, financial markets to infrastructure sectors, and so on. They start with good intentions to address a felt need, only to gradually become captive to vested interests, who are generally the early beneficiaries of the regulations.
This trajectory of evolution is also true of new technologies, which tend to flourish in conditions of light-touch regulation. As the technology grows, and especially with those which have network effects, the early movers develop large moats and resist any regulation that dilutes their head start.
All these are classic market failures, and demand public policy action. In the case of zoning regulations, it becomes essential for central (or provincial) governments to step in and mandate regulations that seek to correct the failures and expand supply. The recently passed California SB 79 Act, which overrides restrictive local zoning limits to set new zoning limits that aim to expand housing supply, is a good example.
In the cities of developing countries like India, high-density urban development is associated with slums, poor quality of infrastructure, and generally stressed carrying capacity of the locality. This experience, reinforced by the prevailing trends and theories from the West about low-density suburban growth, has led planners in these countries to deeply internalise the belief that upzoning is detrimental. They, and their influence on the bureaucrats and politicians, are perhaps the biggest obstacles to upzoning in these countries.
The strength of the argument that affordable housing is constrained by restrictive zoning regulations is diffused by other demands for lower taxes and fees on land and construction, lower cost of capital for real estate, release of vacant government lands, and so on. Besides, the sprawl has come to be accepted as a norm. All these come in the way of radical reforms to zoning regulations that appear all too logical.
