The impact of large-lot zoning and open space acquisition on home building in rural communities

Local governments in the United States use a wide range of tools to preserve rural landscapes. Some of these tools, like the purchase or transfer of development rights, are generally welcomed by farmers and other large landowners. Other tools, like increasing the minimum lot size in a town’s agricultural zone, are more controversial because they are believed to have negative effects on landowner wealth. In this contentious policy environment, it would be useful to know which land use tools actually work to control residential growth, thus achieving the consensual objective of rural preservation. It is reasonable to suppose that large-lot zoning and open space preservation will both reduce the number of homes in a community when it is fully developed. The short and medium-term effects of these policies, however, are less certain. Indeed, there is some evidence that permanently-preserved open space increases short-run home building through an “amenity magnet” effect. Similarly, an increase in minimum lot size could trigger the immediate development of agricultural land by reducing the option value of waiting. This study uses data on 83 communities in the Highlands region of New Jersey to help answer these questions about the unintended consequences of these two rural conservation tools. The dataset includes GIS-based information on developable land, open space inventory, and minimum lot size zoning for the period 1995 to 2002. The study concludes that the relationship between minimum lot size and homebuilding in a community can be described as a concave quadratic. The pace of homebuilding rises to a maximum at a weighted average minimum lot size of 4.15, and then starts to fall. The percentage of a community that is permanently-preserved open space was found to have no significant effect on homebuilding, other things equal.