Wednesday, April 20, 2011

Dryden Zoning

Several months ago I mentioned the proposed local Dryden zoning changes. To me, its primary drawback is that the proposal forbids anything not specifically allowed, rather than allowing anything not specifically forbidden. Since these proposals are only adjusted every 30-50 years, there's a lot of room for new ideas we don't know we're forbidding (like organic agriculture or internet services that we couldn't predict 30-50 years ago).

The other problem is that land owners are deeply concerned that down-zoning their property lowers the value of their property. Though there are arguments the down-zoning could also increase value, it's not abundantly clear that the positive externalities from being in an area with a lot of open land are large enough to counter the loss of flexibility for what you are allowed to do with your own property. A new article in the American Journal of Agricultural Economics by Liu and Lynch (an ungated version here) asks "Do Zoning Regulations Rob Rural Landowners' Equity."

They find that if you own agricultural land, there is no effect. On the surface, it appears that non-agricultural land loses 50% of its value, but at least half of that comes from being in an area that is considering down-zoning. Once you account for political decision making (endogeneity), down-zoning reduces non-agricultural land values by 20-28%.

Come on, Dryden. Don't do this.

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