The Political Economy of Downzoning

Increasingly, in response to concerns about urban sprawl and environmental protection, local governments are exercising their police power to reduce the legal permitted density on undeveloped land. This controversial practice, known in many parts of the country as "downzoning", is generally opposed by farmers, developers and others whose market opportunities are limited by such action. This paper constructs a theoretical model of the impact of larger minimum lot sizes on the current land prices of farmers and homeowners within the same community. The theoretical model suggests that net losses for farmers and net gains for homeowners from downzoning are a reasonable, if not inevitable, expectation. Following Pelzman, Hahn, and Campos, the paper then develops a model to explain the public choice decision-making process that leads to downzoning by local public officials. This model is tested using data on 214 New Jersey municipalities. The probability of downzoning is found to increase when there is a lot of open space to protect, but only when farmers constitute a small proportion of all voters. The probability of downzoning also increases when a community has experienced rapid population growth and increased land values. It is more likely to be found in municipalities that have enacted right-to-farm ordinances, suggesting an overall preservation focus on the part of the community along with some sensitivity to farmers' concerns.