Are Zoning Regulations Justified?

Houston is the only city in the United States which does not have a zoning code. This means that there are no restrictions on where to build, what to build, how to build and how tall buildings should be. But, there are various other restrictions on firms and households in Houston.

What has this led to? Houston has emerged as one of two fastest growing cities in the United States, the other one being Austin. The city's population growth, since 2000, has been manifold when compared to New York, which is a far more productive and prosperous city. People are willing to move to a city which is less prosperous and productive, if it offers better housing. When compared to New York, you can buy a far more spacious house at a much lower cost in Houston.

There is a broad consensus among American public policy thinkers and intellectuals that zoning regulations are harmful. Paul Krugman once said that you do not have to be a conservative to think that zoning regulations are excessive. Even economists in Obama's administration are against zoning regulations. In Chicago, for instance, to change a sign on a building, a person has to fill multiple forms, and this process often takes time.

Even though the US-based intellectuals blame expensive housing and other social evils on zoning, regulations in the US are not as stringent as they are in India. The US does not have cities where an average person consumes 48 sq ft.  The US does not have cities where life expectancy is 67 years, and an average person has to work for over 300 years to be able to buy a 1,000-sq ft luxury home. In the developed West, there are no cities where hundreds of thousands of people live on the pavement for many decades.

But, it is true that zoning regulations make sense in some contexts. For instance, it is true that it does not make much sense to build houses near an industrial plant. There may be valid reasons to prohibit building in certain areas, if it is likely that it will lead to a much bigger disaster when a flood happens. In certain areas, real estate construction may not be good for the environment. Or, a tall building may block the view of many short buildings in a certain neighborhood.

But, there are many problems with these arguments.

Zoning regulations imposed by municipal authorities is not the only way to make sure that people do not build in areas not fit for construction. For instance, if the insurance company of an industrial plant is obliged to compensate homeowners in the neighbourhood for polluting, firms are likely to build industrial plants in areas where there are not many houses.

Zoning regulations in India rarely meet these objectives. In many Indian cities, it is rare that regulations are imposed for such reasons.

Zoning regulations also act as entry barriers for households and firms. People are not likely to migrate to a city where housing is expensive. Zoning regulations also prevent people from running many businesses in which they work from home. In many countries, even street vendors have to apply, and wait for months to get their business off the ground. While in India, the vendors generally set up and then are questioned by the government because their legal status is not clear. Many businesses operate outside the ambit of the formal economy because of zoning regulations. Substandard houses are not redeveloped because zoning regulations are expensive to abide by.

Zoning regulations may rarely preserve the environment, or shield people from pollution and other ills. If zoning regulations are brought down to minimum, all large Indian cities might become more prosperous.