Is agricultural zoning exclusionary?
In rapidly suburbanizing areas, minimum lot sizes of ten acres or greater are often used to discourage residential development and to maintain agricultural critical mass. Because of significant development pressure in these places, there is a good chance these lot size regulations will bind. Such “down-zoning” often appears alongside the purchase of agricultural and conservation easements that reduce housing development even more. Whatever the benefits of such policies for agriculture and the environment, they raise obvious concerns about housing supply and affordability. The issue of affordability should be analyzed at the regional scale, since we would normally expect some high-income, low density enclaves to exist within any metropolitan area. In addition, the analyst should look beyond median home price to compare the distribution of a region’s available housing stock to the distribution of its income. A primary hypothesized effect of large-lot zoning is that it skews the distribution of available housing upward relative to the distribution of income. The present study will use a unique dataset on the New Jersey Highlands region to help answer the fundamental question posed by its title. This dataset includes historical data on the lot size minima imposed on every residential acre in the 83 Highlands municipalities, as well as real estate listing data on thousands of residential transactions in these 83 municipalities. Data from the U.S. Census are used to examine the distribution of income among New Jersey residents who ought to be served by the housing stock in the Highlands. The study finds that in the 1990s and 2000s, the stock of Highlands housing was skewed high relative to the metropolitan incomes available to purchase it, even with renters excluded from the analysis. Using a simple threshold of three times household income, the bottom 30% of households were consistently able to afford fewer than 30% of the homes coming on the market, while the top earners could afford a disproportionately large share of the available housing. At the same time, the study was unable to document a deterioration in Highlands housing affordability in the 1990s and 2000s that was attributable to anything other than the national housing bubble. Down-zoning is likely to affect the mix of housing types on the margin, while the majority of real estate transactions involve homes that were built several decades ago. This suggests either a separate analysis of new construction, or a longer time series on home types and prices that would capture the effects of restrictive zoning over several decades.
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- Gan, Quan & Hill, Robert J., 2009.
"Measuring housing affordability: Looking beyond the median,"
Journal of Housing Economics,
Elsevier, vol. 18(2), pages 115-125, June.
- Quan Gan & Robert J. Hill, 2008. "Measuring Housing Affordability: Looking Beyond the Median," Discussion Papers 2008-09, School of Economics, The University of New South Wales.
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