The Problem with Zoning: Nonlinear Effects of Interactions between Location Preferences and Externalities on Land Use and Utility

An important debate in the literature on exurban sprawl is whether low-density development results from residential demand, as operationalized by developers, or from exclusionary zoning policies. Central to this debate is the purpose of zoning, which could alternatively be a mechanism to increase the utility of residents by separating land uses and reducing spillover effects of development, or an obstacle to market mechanisms that would otherwise allow the realization of residential preferences. To shed light on this debate, we developed an agent-based model of land-use change to study how the combined effects of zoning-enforcement levels, density preferences, preference heterogeneity, and negative externalities from development affect exurban development and the utility of residents. Our computational experiments show that sprawl is not inevitable, even when most of the population prefers low densities. The presence of negative externalities consistently encourage sprawl while decreasing average utility and flattening the utility distribution. Zoning can reduce sprawl by concentrating development in specific areas, but in doing so decreases average utility and increases inequality. Zoning does not internalize externalities; instead, it contains externalities in areas of different development density so that residents bear the burden of the external effects of the density they prefer. Effects vary with residential preference distributions and levels of zoning enforcement. These initial investigations can help inform policy makers about the conditions under which zoning enforcement is preferable to free-market development and vice versa. Future work will focus on the environmental impacts of different settlement patterns and the role land-use and market-based policies play in this relationship.