Zoning Policies Intended to Support Agricultural Abundance Are Failing

By Emily Hamilton

May 09, 2023

Lawmakers in many states are currently debating bills that would, in one way or another, legalize more, less expensive housing construction. If passed, these bills will limit local authority to restrict housing construction. Policymakers are increasingly recognizing that zoning rules are driving the housing affordability problems plaguing growing regions of the country. Some of these rules are intended to preserve land for agricultural use, but in fact, the status quo shuts off opportunities for both urban and agricultural development.

Zoning rules limit the dynamism of America’s urban areas. Because zoning and permit approval processes have made it exceedingly difficult to build new housing in places like the Bay Area, New York City, Boston, and Los Angeles, people are increasingly moving not to where their best opportunities might be located, but to where they can afford housing. Some estimates find that by preventing people from living where they could be most productive, zoning regulations reduce national output by more than a trillion dollars annually.

Wide ranging rules stand in the way of all sorts of housing construction. Zoning regulations in almost all U.S. single-family neighborhoods prevent anything other than detached single-family housing from being built on any lot, preventing even modest densification with townhouses or duplex construction. Most localities only permit apartment construction on a tiny portion of their land. And historic preservation often prevents dense, walkable neighborhoods from growing to accommodate more residents over time.

As a whole, U.S. zoning rules prevent urban density and cause cities to sprawl out further than they would if denser development were allowed. Many critics of sprawl raise the concern that cities are consuming too much land that could otherwise be used for agriculture. In response to these concerns, localities are increasingly adopting rules that limit new greenfield development as well.

Land use regulations stand in the way of serious innovations in agriculture

Absent regulations limiting land’s use to agriculture, decisions of whether or not to develop agricultural land are not made chaotically. Rather, land prices play a crucial role in guiding development decisions. In a simple model of a monocentric city, the land rent gradient is highest (most expensive) at the center, where jobs are concentrated and access to other parts of the city is easiest. In this model, the lowest point of the land rent gradient is at the very edge of the developed land, where land prices are equal to land’s agricultural value in that region.

When demand for living in this hypothetical city increases, the rent gradient shifts up. Then, rising prices lead to new development across the city, including at the outskirts, as the value of land at the edge increases above the agricultural value. Absent zoning, land prices guide land toward being used for its highest and best use. This highest and best use might be a skyscraper for offices or apartments near the center of the city where land is most valuable, or it might be low-rise houses at the outskirts of the city where land is worth less, but it’s valuable enough that homebuyers are willing to pay more for it that farmers are willing to sell it for.

Land use regulations prevent land development from following this expected path. Within many cities’ developed areas, zoning locks land into its initial development pattern, preventing denser redevelopment when demand for space increases. This is particularly true in single-family residential areas. In general, U.S. cities are more accommodating toward greenfield growth at the outskirts of developed areas relative to infill growth within developed neighborhoods, but both are increasingly regulated.

Zoning for “open space,” “agriculture,” or requiring lot sizes of many acres prevents some urban parts of the U.S. from expanding. Some regions of the U.S. have gone as far as to adopt urban growth boundaries beyond which development is banned unless the boundary is expanded. Portland, OR, has the country’s most famous urban growth boundary. Studies of its effects find that the boundary lowers the value of land outside the boundary by limiting its option value. Conversely, the boundary increases the value of land and house prices, inside the boundary.

Proponents of urban growth boundaries, or Smart Growth, generally also support allowing denser development within the boundary so that containment policy, when paired with upzoning, doesn’t necessarily reduce allowable housing construction on net. But as transit expert Alon Levy explains, “In practice [Smart Growth’s] effect is always to make development harder, not easier. The contrast is with transit-oriented development, which in theory means the same thing but in practice counts dwellings built near train stations and not dwellings prevented from being built far from train stations.”

The Smart Growth approach, layered on top of rules that prevent new construction in existing neighborhoods, is only contributing to our housing shortage. As world-renowned planner and our colleague Alain Bertaud writes, “economically successful cities need space to expand” in order to avoid affordability problems. Bertaud explains that urban containment policies developed from fears that unregulated urban expansion onto previously agricultural land could lead to food shortages. Oftentimes, agricultural zoning or green belt policies are framed as “protecting prime farmland,” conjuring fears that the development of new suburbs will leave the country short of the land that it needs to grow food.

Looking at some basic statistics, however, should quell these fears. Just six percent of the United States is developed. Plenty of the other 94 percent is made up of “prime farmland,” and allowing for growth in the places where demand for developed space is high would have only a marginal effect on farmland availability. In his call for One Billion Americans, Matt Yglesias points out that, rather than needing more farmland to feed a growing population over time, the acreage of farmland in the U.S. has fallen since World War II even as agricultural output has grown drastically due to increased productivity.

Relative to many high-income countries, the United States currently has a very low level of population density. The Netherlands, second only to the United States in agricultural exports, has a population density of 1,346 people per square mile compared to just 91 people per square mile here. While the U.S. has made impressive improvements in agricultural output, The Netherlands has advanced much further. Innovators there are pioneering strategies including vertical farming and seed technology to achieve both incredible productivity per acre as well as advances in disease resistant crops and water efficiency.

The idea that localities should zone land for agricultural uses to ensure adequate food production is Malthusian thinking. Just as the emergence of property rights has facilitated massive growth in global population while poverty and hunger have declined drastically, property rights will guide adequate land to agricultural use even as our cities are allowed to expand.

But while agricultural zoning that is preventing urban expansion isn’t necessary for food security, other land use regulations are, in fact, standing in the way of innovations in farming. Many localities have implemented hyper-specific zoning regulations that only allow named uses in a given zone. During the early days of the COVID-19, local land use restrictions often stood in the way of restaurants pivoting to selling groceries. Similarly, many local zoning designations prevent farming outside of land specifically zoned for agriculture.

The issue of zoning preventing agricultural uses has gotten the most attention with rules preventing homeowners from keeping backyard chickens or neighborhoods replacing vacant urban lots with vegetable gardens. While this small-scale urban agriculture might be a positive change to land use in specific cases, it is unlikely to provide a meaningful source of nutrition. But land use regulations also stand in the way of serious innovations in agriculture. In London, for example, commercial urban farming is making it possible to sell herbs and salad greens in restaurants and grocery stores within hours of harvesting. Anyone wanting to attempt the same in the United States would likely need to seek a zoning variance, an expensive and slow process that could prevent entrepreneurs from taking the leap.

Zoning can’t compel any land use, it can only prevent landowners from using their land for desired purposes. While zoning for agriculture near urban centers may seem like a way to get local produce to the farmers market, regulations can’t achieve this goal unless the market supports this outcome. Oftentimes, “agricultural” simply amounts to single family houses with enormous yards. A freer land market could both ameliorate urban housing shortages while also unlocking real improvements in food abundance.

Emily Hamilton is a Senior Research Fellow and Director of the Urbanity Project at the Mercatus Center at George Mason University. Her research focuses on urban economics and land-use policy. Hamilton has authored numerous academic articles and policy papers. Her writing has appeared in USA Today, the Washington Post, and the Los Angeles Times. She contributes to the blog Market Urbanism. Hamilton received her PhD in economics from George Mason University.

Zoning Policies Intended to Support Agricultural Abundance Are Failing

By Emily Hamilton

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