Abstract:
In 1916, New York City passed the first zoning ordinance in any city in the United States. That ordinance was soon modeled and passed by all but a very few of the cities in the country. One of the primary promises made by the supporters of zoning is that zoning increases the values of the residential land in the city. This is accomplished by assuring that a commercial or industrial use is not constructed adjacent to the residential use causing a nuisance situation. Because almost every city in the country passed their zoning ordinance before the 1930's, finding the data necessary to support the claims of zoning supporters has been nearly impossible. This paper tests the hypothesis that zoning increases residential land values estimating the impact of a resent ordinance on the sale values of homes. In 1995, the city of Baytown, Texas, passed its first zoning ordinance producing a natural experiment on the effects of zoning. Previous studies conducted by McMillen and McDonald (1993, 1998) have found that there is a differential impact of zoning on residential land values dependent on the pre-zoning distribution of land use and the viability of a given use. Simply, residential zoning has a different impact on land that is more suited for commercial use than land more suited for residential use. This study uses a Condition, Desirability, and Utility Index that was included in the data set as a proxy for measuring the suitability of the land for residential use. The findings of this study support the model put forth by McMillen and McDonald and, more specifically, find that zoning has an impact on land values that is determined differently based on the suitability of the land as measured by the CDU index.
