Most people agree that property owners should be allowed to use their land as they choose provided they don’t harm other people or their land. The problem comes when trying to define what harms others and how to prevent such harms.
At the end of the nineteenth century, people realized that the value of their property depended in part on what their neighbors did with their property. A tiny house would be worth more in a neighborhood of mansions, while a mansion would be worth less in a neighborhood of slums.
People developed two different ways to protect neighborhood property values. First was the covenanted neighborhood. Purchasers of a home on such a neighborhood would accept certain limits on the use of their property in the form of deed restrictions. Usually this meant that they couldn’t subdivide their land or use their homes for commercial or industrial purposes.
The other response was zoning. First used in the late 1910s, zoning was approved by the Supreme Court in 1926 as an appropriate use of the police power of the state to protect people from unwanted nuisances. The Supreme Court specifically mentioned that an apartment dwelling could be a nuisance in a neighborhood of single-family homes.
Originally, zoning was applied to neighborhoods that had been developed before the idea of covenants was devised. Covenants remained popular in cities that didn’t have zoning. But in cities with zoning, people relied on the zoning to protect their property values and the use of covenants declined.
Both covenants and zoning have, at various times, been associated with racist policies. Many deed-restricted neighborhoods in the early twentieth century forbade selling homes to non-whites. People have also charged that zoning has been used as a way of increasing housing costs to a level prohibitive to low-income people and minorities. Today, of course, racist deed restrictions are illegal, but that doesn’t mean that other forms of deed restrictions can’t be used to protect property values.
If the Supreme Court originally approved of zoning as a way of enhancing property values, a 1965 Supreme Court decision opened the way to using zoning to reduce property values. When New York City passed a historic preservation ordinance to protect Grand Central Station, its owners argued that they deserved compensation for lost economic value. The Court ruled that no compensation was required so long as the owners could get some economic return from the property.
This opened the door to zoning of property in ways that could significantly reduce its value. Whereas neighborhood zoning that restricts homeowners from turning their houses into apartments or taverns would boost neighborhood property values, rural zoning that limits what farmers can do with their land can reduce property values.
Land inside of one of Oregon’s urban-growth boundaries can be a hundred times more valuable than otherwise identical land outside the boundary. While landowners inside the boundary may appreciate the enhanced value of their property caused by the artificial land shortage, landowners outside the boundary can be impoverished by planners’ decisions. Naturally, this also makes any decisions to expand the boundary extremely controversial.
On top of that, planners inspired by smart-growth visions of high-density living are sometimes imposing their ideals on single-family neighborhoods that would rather not be densified. High-density zoning in some areas is so strict that if someone’s house burns down they are required to replace it with an apartment. Thus, zoning has turned 180-degrees from a tool used to protect neighborhoods from unwanted intrusions to a tool used to force unwanted intrusions on reluctant neighborhoods.
The American Dream Coalition opposes zoning that reduces people’s property values without compensation and zoning that imposes planners’ ideals on unwilling neighborhoods. When used for its original purpose, zoning can continue. But to best protect neighborhoods, we favor returning to the idea of protective covenants.