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ARTICLE

Houston Says No to Zoning

Zoning Has Numerous Costs

AUGUST 01, 1994 by JAMES D. SALTZMAN

Mr. Saltzman teaches American literature and public speaking at St. John’s School, Houston, Texas. He is chairman of the Houston Property Rights Association speakers bureau.

“Zoning goes down for third time” read the morning headline of The Houston Post last November 3. As they had in 1948 and 1962, Houstonians voted once more to remain America’s largest city without a zoning ordinance.

“We’ve got to stop the cancerous erosion of the quality of life in many of our neighborhoods. Those people are crying out for help. Zoning is the answer,” said the president of the Houston Homeowner’s Association last August.[1]

Yet, the vast majority of Houstonians were not crying out for zoning. Hispanics and low-income blacks voted overwhelmingly, 58 percent and 71 percent, against a measure touted as the way to “save” their neighborhoods.[2] In a low-turnout referendum, only 10 percent[3] of the city’s registered voters gave their nod to zoning, disproving the pro-zoners’ claim of widespread discontent among Houstonians with their “under-regulated” land market.

In fact, with 17 separate land-use ordinances covering things so specific as trailer parks, rendering plants, and commercial landscaping, property in Houston is not exactly “under-regulated.” However, the evidence from this debate in Houston highlights the advantages of a large city that relies more than any other in America on the market to determine land use.

Exaggerated Risks

With zoning, a city can regulate the location and design of all land uses, from houses to gas stations to bars. Its supporters said that homes unprotected by zoning risk a loss in property value if a business or apartment locates nearby.

Not necessarily. Drive around central Houston and you’ll find plenty of expensive new houses built across the street from or adjacent to existing commercial or apartment buildings. The people who build and buy these homes are not dumb. There is obviously a strong market for homes in convenient urban settings.

This casts doubt on the need for zoning to protect or boost property values. Within Houston are two small, independent cities, Bellaire and West University, with zoning. Between 1970 and 1980 home prices in Bellaire and West University climbed more slowly than in many Houston communities, including those lacking private neighborhood restrictions against businesses and apartments.[4] In fact, between 1990 and 1993, average annual home sale prices actually fell in the two zoned cities while sprinting up in a number of Houston neighborhoods, restricted and unrestricted.[5] The financial risks to homes unshielded by zoning are, at best, greatly overstated.

Another exaggeration is that single-family neighborhoods without zoning are likely to be overrun by businesses and apartments. In the Houston Heights, a century-old neighborhood of 300 blocks, only about 5 percent of the residential blocks have private restrictions.[6] Also, a Prohibition-era law left over in the Heights bans liquor sales. Those are the only controls on property in the Heights for the last 100 years, apart from city codes.

Yet single-family homes occupy almost 86 percent of the lots on interior streets. Businesses take up 7 percent; industrial uses, less than 2 percent; apartments, less than 2 percent; churches and schools, 4 percent.[7] Similar distributions in land use have been documented for other unrestricted inner-city neighborhoods.[8] Why does this happen?

In Houston land uses tend to segregate themselves as investors respond to market incentives. Under the Houston system, heavy industry voluntarily locates on large tracts near rail lines or highways; apartments and stores seek thoroughfares; gas stations vie for busy intersections.[9]

With the market at work there’s no need for government-imposed districting. Businesses that open inside quiet residential neighborhoods will compete poorly with establishments that enjoy the visibility and traffic count of a heavily traveled street. Businesses that thrive amidst homes often serve strong local demand.

“Shade-tree” mechanics appear in low-income neighborhoods to service old cars owners cannot afford to replace. “More and pop” grocery stores supply those who have no cars. In Houston’s West End, an area with a large population of artists, stylish and expensive townhomes exist beside framing factories and studios. Around Houston, such mutually beneficial mixtures of commercial and residential uses reflect the market’s sensitivity to consumer needs, a sensitivity unimpeded by the tastes of politicians and bureaucrats.

Pro-zoning fears ignore the serf-regulating qualities of the market. In locations with stable demand for single-family homes, healthy real estate values are likely to prohibit many “noxious” uses—like junkyards and machine repair shops—that want cheap land. Without realizing it, the homeowners have “zoned out” such uses through their own free choices. As zoning expert Bernard Siegan says, “the most effective of restrictions [is] competition.”[10]

Self-Buffering

Since the market creates predictability in land use, anyone can buffer himself according to his own standards from uses he dislikes. He can pursue his own notions about quality of life without the local government imposing its version on him.

People who like proximity to retail services can live on or near heavily traveled streets and assume the risk of facing more noise and traffic than individuals who seek the peace and quiet of an interior residential street. The need to keep bars away from residents is a frequent justification for zoning, but one Houstonian said he likes living near a bar because “patrons to establishments and pedestrian traffic are deterrents to crime.”[11] In Houston, to each his own.

Even without zoning, home buyers wanting control over the development of land in their neighborhood have a choice called “deed restrictions.” Usually, these deed restrictions are initiated by an original developer to cover all property purchased in a subdivision for 25 or 30 years. Restrictions are often renewable after that period, and most homes in Houston built since World War II have such renewable restrictions.[12] Enforceable by civic associations with help from the city, the document can prevent businesses or apartments from entering the neighborhood. It can even require residents to keep their lawns manicured or their homes painted only certain colors. However detailed, deed restrictions contain rules voluntarily accepted by home buyers, unlike the edicts issued to property owners by a zoning commission.

Predictably, zoning proponents criticize deed restrictions for not providing air-tight protection against mixed uses. Restrictions end at subdivision boundaries, leaving residents at the neighborhood’s edge possibly unbuffered from an apartment or business. Zoning supporters want guarantees of protection that neither deed restrictions nor the market’s natural separation of land uses can provide.

But are such guarantees possible, even under zoning? In Fort Worth and Dallas, two zoned cities, one can notice an eight-story office building overshadowing nearby homes, a high-density apartment complex and a shopping center across a narrow street from homes, and a junk dealer and a tire store next door to homes. Even in tightly zoned central Connecticut, one can find a factory right beside a home, a new supermarket being built next to homes, and a bar across the street from homes—mixes routinely denounced as “incompatible” by zoning advocates in Houston.[13]

In land-use patterns and in the predictability of those patterns, Houston and zoned central cities are more similar than pro-zoners admit.[14] The difference is that Houstonians internalize risks (quite successfully) that zoning attempts to control elsewhere by managing the property rights of citizens.

The Houston Advantage

That’s the Houston advantage: private property rights. True, Houston has many strict ordinances, but without zoning, citizens in Houston maintain over their property much of the control that other cities give to local government. Zoning dramatically increases the opportunity for public officials to manipulate private property for maximum political benefit and “impose costs on others at no cost to themselves,”[15] writes economist Thomas Sowell. Under zoning, local goods and services reflect regulatory costs Houstonians avoid.

One such good is housing. Without zoning, Houston ranks consistently as the leader among major American cities for housing affordability. “It’s more affordable here than any other large city in the nation,” said University of Houston economist Barton Smith.[16] According to Smith, one reason for this affordability is Houston’s lack of zoning.[17] And a federal report in 1991 cited zoning as a leading cause for the shortage of affordable housing in America.[18] How does zoning push up the cost of housing?

The proposed Houston zoning plan showed how. It contained density controls that would have forced higher rents for many new apartments and higher prices for many new townhouses.[19] In one case, a planning commissioner effectively froze the renovation of a low-income apartment building by having it zoned into a district just for single family homes. In this way, the structure became a “non-conforming” use, discouraging lenders from risking money on the project.[20] In the long run, zoning increases the cost of housing by restricting its supply. Ironically, zoning makes such bad policy a predictable choice for municipal authorities because they are sensitive to the desire of politically influential homeowners to limit development near their neighborhoods.[21] In unzoned Houston, developers can adjust the number of dwelling units per lot to suit consumer demand, not the agendas of zoning insiders.

Zoning proponents say they just want bargaining power with a developer of land near homes. Ideally, they argue, a compromise on use or design could be struck that would create a “win-win” situation for everyone.

Well, not exactly everyone. Concessions to build fewer dwelling units in an apartment could raise rents there, pricing some individuals out of the complex. And the likelihood of construction delays fostered by zoning procedures and squabbles will price some builders out of their market as well. For example, according to one journalist, zoning and related land-use regulations have boosted the cost of development in Austin, Texas: “Problems—whether they involve neighborhood opposition, new ordinances, unclear policies or moratoriums—mean delays and delays cost money.”[22] The interests of the most vulnerable consumers and producers are protected by secure private property rights, not by zoning.

Such rights also provide Houston with employment opportunities that zoning would have removed. One case involved Forged Vessel Connections, a manufacturer of special parts for pressure vessels. The company has been in its location in the largely black community of Acres Homes for the last 17 years and employs residents from the surrounding neighborhood. But the plant was zoned into a residential district, meaning the building could not expand, meaning the end of plans to add 35 new jobs by 1996.

In unzoned Houston home businesses are common and operate relatively freely wherever they are not prohibited by deed restrictions. But the zoning plan had a different approach:

No employees on site except residents. No signs. No parking spaces for customers. No external evidence of commercial activity.[23] For Houstonians, a taste of the regulation plaguing home businesses in 90 percent of American cities.[24] And the Houston Homeowner’s Association, a leading pro-zoning interest, assured its members that there was no reason why home business “standards have to be limited to these prohibitions,”[25] suggesting that more rules could be added later.

Zoning would have created undue hardship for many entrepreneurs. For example, one single mother started a telephone answering service in her own home, hiring other women from the neighborhood for help. Zoning would have forced her to fire her employees or rent office space. She might have applied for an exemption and prayed that her aspirations suited her neighbors and city officials. This scenario offends the principle that the opportunity to use private property for employment is a right, not just a favor granted by local government.

The greatest beneficiaries of Houston’s abstention from zoning are not the rich, greedy developers as zoning proponents would claim. Big developers in zoned areas enjoy the reduced competition brought by zoning and can afford the lawyers and other consultants needed to acquire variances from zoning rules. Those who have the most to gain from the free exercise of rights to private property are the unemployed and the poor, those who can least afford the costs of regulation.

Examples occurred during the 1980s when Houston lost 250,000 jobs[26] during the “oil crash.” As one Houston reporter recalls: “Because there were a handful of neighborhoods where there were no significant barriers to home businesses, the bust became an opportunity instead of a devastation. Time and time again I saw the unemployed become entrepreneurs.”[27] Time and time again in Houston’s Hispanic neighborhoods entrepreneurs also emerge from homes.

Affordable housing near retail services, home businesses unhindered by excessive regulation—these are the blessings, not cancers, of a city in which the people determine the use of their property.

If anything, the presence of zoning, not the lack of it, can be cancerous to an old neighborhood. Real estate economist Jack Harris explains that “zoning causes problems in transitional neighborhoods. Although the market may indicate the need for change in land use, zoning attempts to prohibit change.”[28] Harris is saying that the market is smarter than bureaucrats and politicians. Unfettered by the realities of the marketplace, they may attempt to “improve” or “preserve” a neighborhood by zoning out most businesses and apartments, as if declining communities can be economically revived just by legislating non-existent demand for single-family homes.

A free market in land use does not guarantee neighborhood revitalization. But letting people decide what to do with their property can assist the recycling of land, especially when commercial or multi-family construction may capture the only viability a neighborhood has.

In the end, zoning restrictions only inspire their circumvention. A speculator will purchase tightly zoned properties for their artificially deflated price and then turn a hefty profit by negotiating with the proper officials for a less restrictive classification.[29] Such a scheme favors those with political clout. At least without zoning, larger benefits go to the original property owners, who can sell their land at its actual market price. Either way, market forces prevail. Zoning just slows them down and makes them costlier.

But zoning makes intolerance less costly. Some pro-zoners demanded the separation of houses from low-income apartments. “These ramshackle complexes contain hundreds of people of minimal educational and economic attainment, with value systems completely foreign to the majority of homeowners,”[30] complained the vice president of the Committee to Zone the City in August of 1990. In other words, it is not just the wrong kind of land uses that are “incompatible” with homes but the wrong kind of people as well. Such efforts to exclude the poor cannot prevail where the property rights of landlords and developers are secure.

Moral Costs

Zoning makes business activities and housing more expensive, but the greater cost of zoning is moral. In essence, zoning grants a cadre of public officials and favored private citizens the free exercise of state power to force their designs on the use of someone else’s property. This process trivializes the individual’s basic right to self-determination. By voting down zoning, Houstonians have strengthened their claim to that right. []

Notes

  1.   “Is Your Neighborhood Next?”, political advertisement, Citizens for Zoning.
  2.   Karen Weintraub, “Zoning goes down for third time,” The Houston Post, p, A-18.
  3.   Alan Bernstein and Jim Simmon. “777,062 registered to vote,” The Houston Chronicle, October 19, 1993. Weintraub, op. cit., p. 1. Zoning lost 52 percent to 48 percent.
  4.   Meredith H. James, “The Effect of Zoning on Residential Values,” privately published, 1991.
  5.   “Tracking Houston’s Home Prices,” The Houston Post, July 23, 1993, G-4.
  6.   Rosie Walker. ‘”Friends in Deed’ signing up Heights residential block,” Houston Downtown, May, 1989, p. 43.
  7.   Meredith James, “The Houston Heights After 100 Years,” privately published, 1991.
  8.   Bernard H. Siegan, Land Use Without Zoning (Lexington, Maas.: D.C. Heath and Company, 1972), pp. 36-42.
  9.   Dick Bjornseth, “Houston Defies the Planners,” Reason, February, 1978, p. 17.
  10.   Siegan, p. 140.
  11.   Jim Constantin, letter to the editor, Public News, December 23, 1992, p. 2.
  12.   Houston subdivisions after World War n routinely installed serf-renewing deed restrictions to qualify for FHA and VA loans.
  13.   All examples in this paragraph come from the author’s personal observation.
  14.   Siegan, pp. 73-74.
  15.   Thomas Sowell,”The ‘Takings’ lssue,” Forbes, March 2, 1992, p. 60.
  16.   Ralph Bivens, “Housing market most affordable here since 1950,” The Houston Chronicle, November 1, 1991, p. 1 E; also Ralph Bivens, “Study: Houston housing among U.S.’s most affordable,” The Chronicle, June 24, 1993.
  17.   Karen Roebuck, “City rent lowest of 25 major cities,” The Houston Post, March 20, 1989, p. A-l.
  18.   “Not in My Back Yard”; Removing Barriers to Affordable Housing, Advisory Commission on Regulatory Barriers to Affordable Housing, Dept. Housing and Urban Development, 1991, 2- 5 to 2-7.
  19.   The Houston Zoning Ordinance, September 15, 1993, contained open-space requirements for apartments in two categories (48-2118, 48-2222) allowing multi-family housing. Townhomes were restricted to four units per lot for another category covering areas where a common practice is to build five.
  20.   Jim Sherman, “Nightmare on Bagby,” Public News, March 17, 1993, p. 5.
  21.   Bill Gilmer, “Zoning Rejected Again: Why the Issue Won’t Die,” Houston Business: A Perspective on the Economy, November, 1993, p. 2.
  22.   Lisa Delany, “The Expediters: They Get You Through Austin City Hall,” The Austin Business Journal, February 3, 1986, p. 15. Even in pro-growth Dallas, zoning slows large development projects by 4-8 months. See Richard B. Pulser, “Land Development Regulation: A Case Study of Dallas and Houston, Texas,” American Real Estate and Economics Journal, 9 (Winter 1981), pp. 397-417.
  23.   Houston Zoning Ordinance, 48-2112 (e), 1-5.
  24.   Joanne H. Pratt, “Home-Based Work: New Opportunities for Women?” The Freeman, May 1988, p. 198.
  25.   “HHA board studies home-based businesses,” Neighborhood News, Summer, 1992, p. 4.
  26.   Carl Hooper, “Silver lining likely in city job market,” The Houston Post, June 18, 1992, p. E-I.
  27.   Jim Sherman, “Dear Mr. Lithe, An Open Letter to Bob Litke, Deputy Director of Planning and Development,” The Houston Agenda, June, 1993, p. 4.
  28.   Jack Harris, “Understanding Land-Use Controls,” Texas Real Estate Research Center technical report, July 1986, p. 21.
  29.   Mark Kaufman, “An architect ‘insider’ speaks out against zoning,” The Houston Business Journal, March 29, 1993, p. 8.
  30.   Herman Lauhoff, “Without zoning, American dream is a ‘Houston nightmare,’” The Houston Chronicle, August 12, 1990, p. 5E.

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