Land Use Regulations and Development Impact

Chapter 5: Land use regulations❓❓❓❓ and Development Impact

Introduction

Land use regulations play a crucial role in shaping the landscape of development and influencing land value❓. These regulations, enacted by governmental entities, aim to promote planned growth, ensure compatibility between different land uses, protect environmental resources, and provide for public health, safety, and welfare. This chapter delves into the scientific principles and practical implications of land use regulations and their impact on development projects.

5.1. The Rationale for Land Use Regulations

5.1.1. Externalities and Market Failure

Land use decisions by one property owner can generate externalities, which are costs or benefits that accrue to others without being reflected in market prices. Negative externalities, such as pollution, traffic congestion, or decreased property values due to incompatible land uses, can lead to market failure, where the free market fails to allocate resources efficiently. Land use regulations are often implemented to mitigate these negative externalities and promote more socially desirable outcomes.

Scientific Basis: The concept of externalities is a fundamental principle in environmental economics and welfare economics. The Coase Theorem (Coase, 1960) suggests that in the absence of transaction costs❓, efficient resource allocation can be achieved regardless of the initial allocation of property rights. However, in reality, transaction costs are often significant, and land use regulations provide a mechanism to address externalities directly.

5.1.2. Public Goods and Collective Action Problems

Certain land uses, such as parks, open spaces, and infrastructure, provide public goods, which are non-excludable and non-rivalrous. Because individuals cannot be excluded from enjoying the benefits of public goods, there is little incentive for private developers to provide them. This leads to under-provision of public goods. Land use regulations, such as open space requirements in new developments, can help overcome this collective action problem and ensure the provision of necessary public amenities.

Scientific Basis: Public goods theory, developed by Samuelson (1954), explains the challenges of providing goods with non-excludable and non-rivalrous characteristics. Land use regulations offer a practical mechanism for addressing this market failure.

5.1.3. Information Asymmetry

Potential developers may possess more information about the impact of a proposed development than surrounding property owners. This information asymmetry can lead to inefficient land use decisions and community opposition. Land use regulations, particularly those that require environmental impact assessments (EIAs) and public hearings, can help level the playing field and ensure that all stakeholders have access to relevant information.

5.2. Types of Land Use Regulations

5.2.1. Zoning Regulations

Zoning is the most common form of land use regulation. It divides a municipality into districts and specifies the permitted uses, density, and dimensional requirements for each district. Zoning ordinances typically include provisions for:

• Use Regulations: Specifying the types of activities allowed in each zone (e.g., residential, commercial, industrial).

• Density Regulations: Limiting the number of dwelling units per acre or the floor area ratio (FAR).

  FAR = Total Building Floor Area / Lot Area

• Dimensional Regulations: Setting minimum lot sizes, setbacks, building heights, and parking requirements.

5.2.2. Subdivision Regulations

Subdivision regulations govern the process of dividing land into smaller parcels for development. These regulations typically include requirements for:

• Street Layout: Ensuring adequate street widths, connectivity, and access.
• Infrastructure: Requiring the provision of water, sewer, drainage, and utility systems.
• Lot Design: Specifying minimum lot sizes, shapes, and orientations.
• Open Space: Mandating the preservation of open space and recreational areas.

5.2.3. Environmental Regulations

Environmental regulations aim to protect natural resources and mitigate the environmental impacts of development. These regulations may address:

• Water Quality: Controlling stormwater runoff, wastewater discharge, and groundwater contamination.
• Air Quality: Regulating emissions from industrial and transportation sources.
• Wetland Protection: Restricting development in wetlands and requiring mitigation for unavoidable impacts.
• Endangered Species: Protecting habitat for threatened and endangered species.
• Coastal Zone Management: Regulating development in coastal areas to prevent erosion and protect marine ecosystems.

5.2.4. Building Codes

Building codes establish minimum standards for the design, construction, and maintenance of buildings to ensure public safety and structural integrity. These codes cover aspects such as:

• Structural Design: Requiring compliance with seismic, wind, and snow load standards.
• Fire Safety: Mandating fire-resistant materials, sprinkler systems, and fire exits.
• Accessibility: Ensuring that buildings are accessible to people with disabilities.
• Energy Efficiency: Promoting energy conservation through insulation, efficient lighting, and HVAC systems.

5.3. Impact of Land Use Regulations on Development

5.3.1. Land Value

Land use regulations can significantly impact land value by restricting the types and intensity of development allowed on a particular parcel. More restrictive regulations generally lead to lower land values, while more permissive regulations can increase land values.

Empirical Evidence: Studies have shown that zoning regulations can have a substantial impact on property values (e.g., Fischel, 1985). For example, zoning that restricts housing density can increase the value of existing single-family homes but decrease the value of land that could be used for higher-density development.

5.3.2. Development Costs

Land use regulations can increase development costs by requiring developers to meet specific design standards, provide infrastructure improvements, and obtain permits and approvals. These costs can be particularly burdensome for small developers and can discourage investment in certain areas.

Mathematical Representation: Total Development Cost (TDC) can be represented as:

TDC = Land Cost (LC) + Construction Cost (CC) + Regulatory Compliance Cost (RCC) + Financing Cost (FC)

Where RCC includes costs associated with permits, impact fees, and environmental mitigation.

5.3.3. Housing Affordability

Land use regulations, particularly those that restrict housing density and increase development costs, can contribute to housing affordability problems. By limiting the supply of new housing, these regulations can drive up prices and make it more difficult for low- and moderate-income households to find affordable housing.

Economic Principle: The basic principles of supply and demand suggest that reducing the supply of housing through restrictive land use regulations will lead to higher prices, assuming demand remains constant or increases.

5.3.4. Sprawl and Transportation

Land use regulations that encourage low-density development and automobile dependence can contribute to urban sprawl, increased transportation costs, and environmental impacts. Conversely, regulations that promote compact, mixed-use development and transit-oriented development can help reduce sprawl and promote sustainable transportation.

5.4. Legal and Regulatory Framework

5.4.1. Enabling Legislation

Land use regulations are typically authorized by state enabling legislation, which grants municipalities the power to regulate land use within their jurisdictions. These enabling statutes often specify the procedures that municipalities must follow in adopting and administering land use regulations.

5.4.2. Comprehensive Plans

Many jurisdictions have adopted comprehensive plans, also known as master plans or general plans, which provide a long-term vision for the community’s development. Comprehensive plans typically include goals, objectives, and policies related to land use, transportation, housing, economic development, and environmental protection.

5.4.3. Legal Challenges

Land use regulations are often subject to legal challenges by developers or property owners who argue that the regulations are unconstitutional or violate their property rights. Common legal challenges include:

• Takings Claims: Arguing that the regulations amount to a “taking” of private property without just compensation, in violation of the Fifth Amendment to the U.S. Constitution.

  Legal Principle: The Penn Central test (Penn Central Transportation Co. v. City of New York, 1978) is often used to determine whether a land use regulation constitutes a taking. The test considers the economic impact of the regulation, the extent to which it interferes with reasonable investment-backed expectations, and the character of the government action.

• Due Process Claims: Arguing that the regulations are arbitrary, capricious, or lack a rational basis.

• Equal Protection Claims: Arguing that the regulations discriminate against certain groups or individuals.

5.5. Practical Applications and Experiments

5.5.1. Case Study: Evaluating the Impact of Form-Based Codes

Form-based codes (FBCs) regulate the physical form of buildings and urban spaces, rather than focusing solely on land use. An experiment could involve comparing the development outcomes in two similar areas, one regulated by traditional zoning and the other by an FBC. Metrics to evaluate include:

• Housing Density: Units per acre.
• Mix of Uses: Percentage of land area dedicated to residential, commercial, and other uses.
• walkability❓❓: Measured using a walkability index based on street connectivity, building density, and land use mix.
• Property Values: Average price per square foot.

5.5.2. Simulation: Modeling the Impact of Density Bonuses

Density bonuses allow developers to build at higher densities in exchange for providing public benefits, such as affordable housing or open space. A simulation model can be created to analyze the impact of density bonuses on housing affordability and municipal revenues.

Model Parameters:

• Base Density: Maximum density allowed without a bonus.
• Bonus Density: Additional density allowed with a bonus.
• Inclusionary Zoning Requirement: Percentage of units required to be affordable.
• Market Price per Unit: Average selling price of market-rate units.
• Affordable Unit Price: Restricted selling price of affordable units.
• Municipal Revenues: Property taxes and impact fees generated by the development.

5.5.3. Real-World Example: Analyzing the Effects of Urban Growth Boundaries

Urban growth boundaries (UGBs) are lines that delineate the area within which urban development is allowed. An analysis can compare two cities, one with a UGB and one without, focusing on:

• Land Prices Inside and Outside the UGB: Comparing the difference in land values.
• Housing Affordability: Median housing price as a percentage of median income.
• Sprawl: Measured by the rate of land consumption per capita.
• Transportation Patterns: Commute times and mode share (percentage of trips by car, transit, bike, and walking).

5.6 Conclusion

Land use regulations are essential tools for managing growth, protecting environmental resources, and promoting public welfare. Understanding the scientific principles and practical implications of these regulations is critical for appraisers, developers, and policymakers seeking to create sustainable and thriving communities. The impact of land use regulations can be represented mathematically and through empirical studies, leading to evidence-based decision-making and more effective land management strategies.