From its roots as a tool to bypass constitutional limits on race-based zoning codes to the socioeconomic exclusion of the past 50 years, the foundational policies of planning communities across the country are not without controversy.

Policymakers have long discussed the what, who, and why of zoning and exclusion, but the how hasn’t received the attention or criticism it deserves. 

HOW zoning remains exclusionary today has been a part of planning and zoning since the Standard State Zoning Enabling Act and Standard City Planning Enabling Act began to be implemented in cities and states across America. And while the name and its prioritization have changed over the years, fiscal zoning lies at the center of our nation’s housing crisis.

Related: History of Exclusion in America’s Housing Policies

EVOLUTION of Fiscal Zoning: Century of Exclusion

A century ago, there was no “exclusionary zoning” or “fiscal zoning” there was simply zoning. Use segregation and basic planning powers have evolved over the past 100 years, but the basics remain relatively unchanged.  

Designated zones for certain uses, density, and other tools have been there from the beginning.

By the 1970s, communities began to move away from modest starter homes and a variety of housing options. Fiscal impact zoning, a planning philosophy that ensured development did not overextend community resources in the short term, began to take a long-term view.

It was then that the word “impact” was dropped, and “fiscal zoning” emerged.

Maximizing property tax revenue and minimizing future liabilities in the long term became central planning goals. Down zoning took hold in established communities and new starter homes, which fueled America’s growth since the Second World War, became an endangered species.

This approach to community planning doesn’t just limit where people can afford to live, it also segregates communities by income, which often correlates with race due to historic patterns of discrimination. By preventing the construction of more affordable housing units, fiscal zoning locks in inequality, making it harder for lower-income and minority families to access neighborhoods with good schools, safe streets, and economic opportunities.

Core of the Housing Crisis

The housing crisis is a function of supply and demand.

If you ever took an ECON 101 course, you know that when there’s high demand for something but not enough supply, prices go up. That’s precisely what’s been happening in many cities across the country. People want to live in certain areas, but there isn’t enough housing. The cumulative impact of a decade and a half of underbuilding has resulted in an astounding 3- to 4-million-housing-unit deficit in our country.

Restrictive zoning laws prevent the free market from building enough housing to meet demand. This lack of housing raises existing home prices and rents due to the downward pressures placed on the market.

But it doesn’t end there.

By restricting supply through density controls and limiting the buyer pool through fiscal zoning, affordability and access are further negatively impacted.

Fiscal zoning is how the free market is held back from addressing the housing crisis. Under fiscal zoning, lower density is preferred. Higher-cost homes are also given preference as it is perceived that higher-income individuals will be less of a burden on the community.

Path Forward

The path forward speaks to all sides of the political spectrum. For those left of center, the solution is liberalizing our housing policies to address the historical inequities in housing and enable our communities to grow in a more environmentally responsible way. For those right of center, it is about deregulating housing, getting the government out of the way, and strengthening property rights.

No matter how you view reforms or what your vision of housing is, zoning modernization approaches share the goal of solving the housing crisis by:

• Creating more housing options and flexibility in the planning process.
• Making communities less reliant on discretionary reviews and fiscal zoning.
• Reducing affordability roadblocks and the elimination of reliance on fiscal zoning tools and practices.
• Ending historically exclusionary zoning practices
• Addressing housing equity gaps.

Until fiscal zoning is laid to rest, our country cannot close the door to a century of exclusionary practices in planning and development.

This commentary is part of Housing Affordability Institute’s Exlcusionary Zoning Series.