Zoning Rules! The Economics of Land Use Regulation (William Fischel)

Economists have conclusively determined that land use restrictions in America cause substantial economic harm. Reducing these restrictions in major metropolitan areas (New York, San Francisco, Silicon Valley, Los Angeles, Washington) to the national average level could increase the economy by approximately 9%, which is equivalent to creating a new Canada. This represents an extremely large consensus on potential economic growth through policy changes.

Four major land use restrictions undermine affordable housing: minimum lot sizes (snob zoning) exclude low-income residents; parking requirements substantially increase housing costs; inclusionary zoning forces affordable units in exchange for density bonuses; urban growth boundaries restrict where development can occur. Economists estimate these regulations could increase US GDP by 9% if removed from productive cities. They restrict labor market mobility, forcing high-productivity workers to live in less productive areas or commute long distances. Data shows income convergence across regions has slowed since the 1970s. Low-income households suffer most through long commutes, substandard housing, and inability to move to productive areas.

High housing costs result from zoning laws and land use restrictions that limit housing supply. Key issues include: (1) Supply-demand mismatch driving up prices; (2) Equity problems where homeowners accumulate wealth while renters cannot save; (3) Macroeconomic impacts as workers cannot relocate to productive metropolitan areas, reducing overall economic output. Proposed solutions include: (1) Federal legislation defining excessive zoning as property takings requiring compensation; (2) Using Commerce Clause authority to regulate interstate commerce effects; (3) Attaching land use deregulation requirements to federal infrastructure funding. This approach releases latent productivity without direct government spending.

Land use zoning regulations have become a major driver of housing unaffordability in American cities. While zoning has existed for about 100 years with exclusionary social consequences, its macroeconomic impact was minimal until recently. With increasing restrictive regulations and exhaustion of sprawl opportunities, especially on coasts, land use rules now significantly affect housing production quantities by jacking up prices. Economists have calculated that regulatory taxes (percentage of housing prices due to permission costs) range from 20% in DC/Boston to 50% in San Francisco/San Jose/Manhattan. This creates severe affordable housing problems locally and deterrs people from moving to economically dynamic regions, with studies suggesting US output could be 10% higher if coastal land use regulations were brought to median US levels.

Government can restrict land use at the regional level. The video describes how the Bogotá region (39 municipalities) has been subject to land use restrictions that prohibit agricultural transformation, industrialization, and new urban development. The video argues this restricts infrastructure projects and economic development in one of Colombia's most important economic regions. This demonstrates how regional land use planning can have significant economic consequences.

NIMBY (Not In My Backyard) is a pejorative term describing blocking beneficial development, commonly used when wealthy communities block affordable housing. YIMBY (Yes In My Backyard) is often presented as the solution but actually supports the status quo and blind faith in the market. These are not a spectrum but both represent problematic approaches. The term NIMBY originated in 1979, and by the 1990s expanded to include homeless shelters and prisons. Robert Lake's 1993 work argued that NIMBY represents local protectionism that actually serves capital interests rather than societal goals, and that switching to YIMBY requires community-oriented solutions rather than capital-oriented ones.

NIMBY (Not In My Backyard) refers to people who want specific policies implemented but don't want them around them—like wanting nuclear energy or prisons but not in their neighborhood. They accept the necessity of these things but don't want to be exposed to them. YIMBY (Yes In My Backyard) is the inverse—people who want socially necessary development in their neighborhood. NIMBYs are often criticized as self-interested Boomer neoliberals who only care about their investments. YIMBYs are criticized as gentrifiers who want development but are blind to its effects on people actually living there. Both positions are seen as wanting to have their cake and eat it too.

The debate between Yes In My Backyard (YIMBY) and No In My Backyard (NIMBY) represents opposing approaches to development. YIMBY advocates support development in their communities regardless of personal impact, while NIMBY advocates prefer minimal or no development near their homes. In Hawaii, particularly in districts with long-term residents, the majority position tends toward NIMBY, as decades-long community members prioritize preserving neighborhood character and preventing overdevelopment that could change their communities fundamentally.

The NIMBY (Not In My Backyard) and YIMBY (Yes In My Backyard) urban development frameworks are ideological constructs that have been co-opted by corporate elites and politicians to serve capitalist development interests, rather than genuinely addressing housing affordability and social justice; both movements contain contradictory elements where NIMBY opposition can either protect vulnerable communities from harmful developments or exclude marginalized populations, while YIMBY pro-growth policies often prioritize luxury developments over affordable housing and perpetuate displacement, making these terms inappropriate for progressive urban activism.

NIMBY (Not In My Backyard) and YIMBY (Yes In My Backyard) represent opposing perspectives in urban planning debates. NIMBY opponents typically argue against new development due to concerns about traffic congestion, school overcrowding, crime, aesthetics, and property values, often prioritizing existing community character over potential benefits. YIMBY supporters advocate for development that brings economic growth, tax revenue, and improved infrastructure. The video illustrates how blocking walkable neighborhoods through NIMBY opposition paradoxically increases vehicle mileage and sprawl, contradicting the stated goal of reducing traffic.

The city has a 10% inclusionary zoning requirement without any give-backs (tax incentives or other benefits for developers). Experts indicate that to increase the affordable housing percentage, the city would need to offer something in return, such as tax reductions, assessment changes, or additional units. The current 10% requirement may actually reduce demand for new construction because it makes projects less financially viable. The city's planner has indicated that going to 10% without incentives may actually reduce the supply of new construction, which would worsen the affordable housing shortage.

Affordable housing is defined as units affordable to households earning up to 80% of area median income. Inclusionary zoning typically requires 10% of multifamily units at 65% AMI or lower. Nonprofit developers may qualify for exemptions. The town council can create deed-restricted columns to track affordable units and consider inclusionary zoning ordinances to increase affordable housing stock.

Inclusionary zoning ordinances require developers to include affordable housing units in new developments. These ordinances specify that designated affordable units remain affordable, tied to government household income figures for a minimum period (often 30 years or forever). Without such ordinances, affordable units may lose affordability as rents increase over time. An ordinance provides a lasting sustainable solution to the lack of affordable housing in a community.

Inclusionary zoning ordinances require that a certain percentage of new housing developments be available to low-income families. In Pacific Palisades, the Resident Protections Ordinance mandates that when rebuilding after fires, a specific percentage of homes must be designated for low-income housing. This policy affects homeowners who lose everything in disasters, as they may be forced to build multi-dwelling units for low-income families rather than private dwellings on their own property. The ordinance applies to high-opportunity areas and requires landlords to rent to low-income tenants at controlled rates, effectively implementing rent control in these areas.

Inclusionary zoning ordinances may require multifamily housing projects with 10 or more units to include a percentage of affordable housing. These requirements are often tied to state legislation such as the Low and Moderate Income Housing Act, which may require municipalities to achieve certain affordable housing percentages to gain exemptions from comprehensive permit requirements. Inclusionary zoning ordinances may include incentives such as density bonuses for developers who provide affordable housing.