"Zoning's purpose was supposed to be preserving investments and neighborhoods, and yet over 70 years our massively zoned cities have seen the greatest wave of decay in urban history. There is no evidence, from anywhere, that zoning has given any declining neighborhood an extra minute of time before its doom arrives."Let's think back for a moment to the purposes which justified the spatial separation of uses and densities in the earliest zoning codes. These are listed on pages six and seven of the 1926 Standard State Zoning Enabling Act, including this entry on conservation of value:
"Such [zoning] regulations shall be made with reasonable consideration, among other things, to the character of the district and its particular suitability for particular uses, and with a view to conserving the value of buildings* . . . .(*Footnote: 'Conserving the value of buildings': It should be noted that zoning is not intended to enhance the value of buildings but to conserve that value -- that is, to prevent depreciation of values such as come in 'blighted districts,' for instance -- but it is to encourage the most appropriate use of land.)"In the Euclid v. Ambler decision, Justice Sutherland attempted to justify zoning's exclusion of high-density residential uses from low-density residential areas:
"With particular reference to apartment houses, it is pointed out that the development of detached house sections is greatly retarded by the coming of apartment houses, which has sometimes resulted in destroying the entire section for private house purposes; that in such sections very often the apartment house is a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by the residential character of the district. Moreover, the coming of one apartment house is followed by others . . . ."The arrival of "apartment houses" in a neighborhood, of course, typically signifies an increase in land values in that neighborhood. Sutherland is describing the ordinary process of urbanization, proceeding according to the highest and best use for each parcel of land as demand and value increase. The new residents of the apartment building may sometimes be of lower economic status, on average, than the individual owner of the home that was replaced, but collectively, the economic productivity of the land (in the form of rental income and/or property taxes) has dramatically increased. Homeowners may object to the presence of the new building, or possibly the presence of its residents, but they are nonetheless the beneficiaries of the increased land values should they decide to sell.
This also addresses the argument that zoning provides a reassurance for investors: since an appearance of new or denser uses in a neighborhood indicates investment and is usually associated with increasing values, not falling values, what good do the exclusionary codes actually do to secure profit? If a residential area desires to maintain its form, at least for a while, the option of temporary deed restrictions always remains.
In the absence of zoning, unchanging form is the mark of a stagnant or declining area. When a neighborhood's land values fall, new investment, and therefore new buildings, will be rare or nonexistent. In this scenario, single-family homes may "filter down" to lower income populations, but this will not involve any change in the physical form or residential use of the house -- the things that zoning governs. When demand falls so far that rental income fails to cover basic upkeep, homes may be boarded up or abandoned altogether, or become victims of arson. Again, zoning will be useless here. The vacant landscape of portions of inner Detroit has retained its vestigial low-density residential zoning, which the 800-page Detroit zoning code dutifully recites is "designed to stabilize and protect the essential characteristics of the district," even after virtually all the structures once present have been burned, demolished or abandoned.
A regulation which prohibits the construction of multifamily dwellings, or the subdivision of land for additional single family homes, can limit an increase in land values, but can do little or nothing to prevent the decline in the second scenario. The justification for zoning might have been more accurately put this way: "It should be noted that zoning is not intended to depreciate the value of buildings but to constrain that value -- that is, to prevent appreciation of values such as come in 'urban districts,' for instance."
The negative effects of artificially limiting supply, on the other hand, have been well documented: surburban sprawl as new development is pushed to the fringes, as Michael Lewyn has shown; increased property taxes leading to tax cap backlashes leading to still more exclusionary zoning; low-density neighborhoods close to downtowns making no-development "suicide pacts," as Chis Bradford describes in downtown Austin, just to name a few.