Friday, March 21, 2008

Zoning is Theft

Another older article published by The Ludwig von Mises Institute:

Zoning is Theft
by Jim Fedako

Zoning is theft, pure and simple. In his fantastic introduction to the Austrian School,
Economics for Real People, Gene Callahan correctly identifies eminent domain as a form of property theft, especially noting the use of government condemnation in order to secure rightfully owned property for commercial development.

It is easy to see government as the crowbar that influence-seekers use to jimmy locks and force private property owners from their land. Here we have the clear picture of Ma and Pa Kettle and clan fighting the law and "progress" armed only with shotguns, corn squeezing, chewing tobacco and shear grit. The flip side to eminent domain, zoning, is not so easily seen. But
as Bastiat revealed, the unseen is as important as the seen.

Zoning is typically defined along the lines of a government-regulated system of land-usage imposed in order to ensure orderly development. Zoning is usually a component of the larger conceptual ideal called regional planning. Of course, planned development is really the name of the road toward
planned chaos.

Zoning uses all the standard interventionist lines of thought, most notably the concepts of externalities and utility. Those who advocate zoning really believe that acting man does not have the ability to create communities that are functional and prosperous. Without plans and maps drafted and drawn by the local elected elite, developers with knowledge and foresight, and a whole lot of money to gain or lose, would purposively layout communities that are sterile and functionless. Only the marginal vote-getters — those elected — and their appointed allies are omniscient enough to peer into the crystal ball and define the perfect setting for future life and leisure. The rest of us can only marvel at their visions.

Just as the developer can use government to roll over the rights of property owners, property owners — community members — can use government to roll over the rights of developers and fellow property owners.

In Ohio, townships create zoning maps and comprehensive plans that overlay development regulations on top of current properties. Prior to the establishment of zoning regulations, a farmer could simply sell his land to the highest bidder. No one had a voice in the proposed use of the exchanged land. The sale to a new property owner incorporated full development rights, including continued farming, residential and commercial development, or parceling off pieces for home sites. Land was a commodity similar to the crops grown on it. Just as no one had a right to control the final use of the corn and soybeans reaped from the soil, no one had the right to control the next use of the land. Property rights were secure.

Zoning changed everything. The future use of existing farmland will, with the stroke of a pen, be limited in some manner by zoning regulations. The regulations could restrict future land usage to its current use — farming in this instance — or it could restrict land usage to some other form of activity.

The free market has a tool that allows a property owner to align the future use of his property with his vision, the restrictive covenant. A property owner could, for example, create a legacy by selling his land contingent on the development carrying his family name. Should the property owner be too restrictive, the value of his property will fall. He will be exchanging a psychic good, a family legacy, for cash.

Zoning is another matter altogether. Zoning restricts current landowners based on the local power brokers. In the zoning process, someone gets hurt. Had the farmers of a township wanted to keep the area as farmland, they could have signed restrictive covenants guaranteeing crops instead of homes. Property rights, and the laws that purport to protect those rights, allow individuals to act in their own best interest. Zoning, collective decision-making, use the coercive power of government to restrict usage based on the whims of those in power.

The farmer who owns this land now has his potential property rights bounded within a specific range; future use is restricted to residential developments that have no more than one house per acre. The farmer may vote, and may have voted for some of those elected, but he never agreed to the change in proposed land usage. He was robbed, and there is no means for him to restore his rights and land value; they are gone with the stroke of a pen.

I know some of those in the Chicago School will claim that the farmer implicitly agreed to the loss of land-usage rights by being born in the United States, or of naturalized American parents, or by becoming a citizen through oath. By owning property in the United States, the farmer granted majority ownership in his property to those elected and appointed, the omniscient and omnipotent. This is no way to build and run a system of secure property rights, and no way to create a free market. Rothbard is correct when he constructs his political economy on secure rights to property; anything less is the beginning of the Hayek's
Road to Serfdom.

Now we have a developer who is trying to satisfy the urgent wants of consumers, his development could include new homes, new stores, new factories, etc. The developer is a keen entrepreneur who sees a chance to turn a profit by creating a development that will be desired, and therefore profitable to him. The developer settles on a residential development and approaches the farmer from above offering to purchase his land, contingent on final zoning approval of course.

You see, the developer has been here before. He knows the ways of the local officials who approve and disapprove zoning changes on whim and fancy — or even the smallest of political pressure. The developer is not going to consummate the deal with the farmer until he knows that his proposed development is a go.

The farmer, old and worn-out, wants to retire and enjoy, along with his wife, his remaining years in leisure and comfort. This is certainly a reasonable request from someone who has worked the dirt in snow, rain, and blistering heat for decades. Who could reasonably question his desire? Commissioners and board members; those omniscient by vote and omnipotent by law.

Remember that the land was designated to be developed at only one home per acre, but the developer does not think he can make a go of it at that yield. Given the market in the area, there is no way for him to turn a profit due to the myriad of other regulatory hoops he will have to jump through in order to get approval for his development. A host of green-eyed bureaucrats see the proposed development as a tax revenue generator. The developer will have to build off-site roads and sewer improvements, donate a park or school site, and give away money to all those governments with their hands out. In addition, regional officials will balk at the proposal since it does not agree with their vision of the future.

So the developer, a Don Quixote at heart, decides to take on the zoning commission by proposing a variance to the zoning code and comprehensive plan. Mr. Developer needs to build one and a half homes per acre, a change that will require months of hearings where he will be badgered and attacked from the zoning commission and community members alike. The commissioners will request petty changes to the development's conceptual plan based on vague building standards that they most likely do not understand. Is stucco created from natural and man-made materials a natural or artificial exterior? Does 50 microns of aluminum create a better look than 49 microns? Should sidewalks be required? How high should the entrance sign stand? Is fire-red a natural color? Is a 30-foot setback sufficient for future property values? The answers depend on which commissioner has the mike at the time.

Residents with property adjoining the development will complain loudly of supposed lost property values, traffic, and crime. In addition, they will attack the developer as evil incarnate bent on destroying the community. But those same voices will lose the rhetoric as soon as the developer offers all adjacent homeowners landscaping allowances. A few thousand in new trees planted in their backyard is enough to forgive any supposed loss in value, additional traffic, and hypothetical break-in.

So the developer now agrees to build roads, upgrade sewer lines, donate parks with equipment, set aside a school site, and improve residential landscape. What is gently termed exaction is really extortion by another name. After zoning comes township trustees meetings and the process begins all over again. More exactions and more regulations, but trustee approval can be had if the developer does the dollar-dance long enough. Had the developer simply slid a rumpled paper bag of twenty's across the table, a law would have been broken. Instead, the process occurs in the sunshine for all to see, and all to agree that more should have been given — or taken.

All agreed, with the exception of the developer and the forgotten farmer. You see, lost in all this is the simple desire of a farmer and his wife to retire and enjoy life, and maybe leave a little for their grandchildren. Every hand looking for a piece of the development pie is not robbing the developer and redistributing supposed unearned profits; those hands are robbing the farmer and his wife of their property value.

The risk of not passing zoning, the exactions, and readily available alternatives for investment are all reductions to the value the farmer could have obtained for his land absent zoning. The loss of value is recognized at the time the developer makes an offer for the land; the theft, on the other hand, occurs in front of the community that the farm family lived in for generations. It shows what damage a little money and power can cause in a community. Zoning is indeed theft.

Jim Fedako is a former professional cyclist who lives in Lewis Center, OH. Comment on the blog.

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