Zoning

In one of my classes last week we were discussing the ways in which economic analysis help us understand why cities develop and why some cities are small and others are large. A very interesting, and I suspect important, question was brought up that might suggest that the broad outlines of the economic analysis are off the mark. The economic analysis suggests that land prices in the center city will be very high, and that land prices will decline as we move out and away from the center city (I think we might subsitute "employment center" for "center city" as well). Given the high prices for land in the center city we would expect to see high density economic uses of this land, and it seems that often the high rise office buildings are found in the center city because of the incentives of high land prices.

The question involves what explains the presence of inner city poor neighborhoods if land prices are supposed to be high in the center city.

I suppose while there might be several possible explanations or elements in any explanation, a student made an interesting observation that might be part of the explanation. The story he told about Denver and Coors Field was that the Lodo area had been a run down area of Denver. After the decision to locate Coors Field in Lodo, the city changed the zoning regulations for parcels in the Lodo area. The result was a process of change that reinvigorated the economic activity of the Lodo area. Several other students immediately responded with their own similar observations from other cities across the country.

One of the things I'm thinking, both about the inner city poor neighborhood question, as well as when I consider why eminent domain is necessary if it is supposed to also be the case that the parcels will be much more valuable in another "economic development" use, is that perhaps zoning could be a significant factor to look at.

I'm thinking about a story I heard told on the radio last week of a church being threatened with eminent domain in Sand Springs Oklahoma. The Pastor of the church told about one of his elderly parishoners who had been in the threatened neighborhood all her life. Government came to take her house in the name of a mall with big box stores, and with government's efforts they moved her to a new house in Tulsa. Now the Pastor has to drive into Tulsa to pick her up for church and then return her to her new home. What I wonder about such stories is why eminent domain is necessary. If the parcel in question is more valuable in another use, then why wouldn't the alternative use present an economic opportunity for the parcel's owner, even if she had lived there all her life? If the property has such great value, then she should be able to sell and earn enough to move and probably have a great deal more money left in her pocket.

I'm thinking that what might be in play is the property is not currently zoned for the activities to which the "economic development" project will put the property. I'm thinking that zoning can preclude the market from valuing property in more valuable alternative uses. This might often have a great deal to do with why the property owners aren't selling to those who would put their property to more highly valued economic uses. Is this possible?

If so, then the use of eminent domain may be even more egregious than I had thought. Why? Because, if it is possible, it would seem the story is that government first says your property can only by used as it currently is. This means that you cannot possibly sell your property for its true economic value in its best use. Then the city says your property should be used differently, but before it changes the zoning so it can be used differently, it is going to threaten to take your property from you. Could this be what is happening in many cases?