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“no benefit” to property owners who desire to keep it in place.25 Obviously, if one or more owners object to abrogation, they will usually be able to make some argument that the restriction provides a benefit to them. Other grounds for seeking abrogation include abandonment, laches, and violation of public policy. The difficulty of obtaining judicial modification or abrogation underscores the desirability of including an amendment mechanism in the original package of covenants.
• Public Regulation: Zoning
The legal mechanisms for regulating neighborhood effects or spillovers previously considered—nuisance suits, modifications of property rights by easements, and covenants running with the land—are all subject to severe limitations. Nuisance suits are expensive and unpredictable, easements require difficult negotiations or legal action, and covenants running with the land, as a practical matter, can only be imposed by developers in new subdivisions. In light of these limitations, it is not surprising that the law has turned to public regulation as a way of encouraging positive and discouraging negative externalities. A wide variety of laws are designed to regulate land use externalities. Environmental laws limiting air and water pollution, regulating and remediating hazardous waste disposal, and assuring the quality of water supplies are examples. Laws like the National Environmental Policy Act (NEPA),26 and its many state analogues, seek to control the impacts of new government projects by requiring a careful consideration of effects and alternatives in an environmental impact statement before the project is undertaken.
25.See, e.g., Bolotin v. Rindge, 41 Cal. Rptr. 376 (Cal. Ct. App. 1964).
26.42 U.S.C. §§ 4321–4335 (2000).
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By far the most common form of public regulation designed to regulate neighborhood effects and externalities, however, are local zoning laws. Zoning laws are of two broad types: Euclidean zoning and planned unit developments.
Euclidean zoning (so named for the Supreme Court case that upheld the constitutionality of local zoning ordinances27) starts with a map of the local community. On the map, neighborhoods are marked off in zones having different types of land uses, such as “industrial,” “commercial,” “residential,” and so forth. Individual parcels of property are restricted to the uses that are permitted in their zone. The permitted uses can be either cumulative or noncumulative. Under cumulative zoning, uses are ranked in a hierarchy from most to least intensive, in accordance with their presumed incompatibility with single-family residences. Within any zone, one can devote one’s land to the designated use plus any less intensive uses. Thus, in a zone designated “commercial,” the owner could build a retail store but could also engage in less intensive uses such an apartment house, a two-family house, or a single-family home. Under noncumulative zoning, only the designated use is permitted. If a zone is designated “commercial,” only commercial buildings are permitted in that zone.
The theory behind Euclidean zoning is that separation of uses will enhance positive spillovers and minimize negative spillovers. Industrial plants will be segregated in one zone, commercial operations in another, apartment houses in yet a third, with single-family homes shielded from all these other uses. In upholding this kind of zoning against constitutional attack, the Supreme Court expressly recognized that zoning was designed to minimize nuisance-like incompatibilities, and that the protection of the single-family home was the dominant objective.
Euclidean zoning works best if it is adopted on a clean slate, before a community is developed. The zoning map, at least implicitly, is deemed to reflect a comprehensive plan for the community, and
27. Vill. of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926).
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all development is supposed to unfold in accordance with this plan. When zoning became popular in the early decades of the twentieth century, however, it was adopted by many cities that were already largely developed. Layering the zones on top of existing neighborhoods was difficult, because often land uses were extremely intermixed. Courts ruled that municipalities could not “downzone” properties that had already been developed and devoted to a use that was incompatible with the zoning scheme. In some states, such “nonconforming uses,” as they are called, have been held to be constitutionally protected as vested rights.28 In some communities, nonconforming uses are permanently grandfathered. In others, they have been given a finite period of time to continue operating, after which they had to be converted into a conforming use or abandoned. Either way, these nonconforming uses inevitably compromised the purity of the comprehensive plan. Interestingly, nonconforming use protection applies only to developed property. Raw land that has not been developed can be subject to severe zoning restrictions that impair its market value, without running afoul of constitutional limitations.
The judicial protection of nonconforming uses highlights the preventive nature of zoning regulation. When a court determines that some land use is a nuisance, or when a legislative body determines that a particular land use is a public nuisance, it is well established that the use can be eliminated, without any need to provide compensation to the owner of the property for losses associated with such action.29 Zoning is designed to prevent nuisance-like interferences, but does not rest on any finding that the owner actually is committing a nuisance. Courts have concluded that this
28.See, e.g., Valley View Indus. Park v. City of Redmond, 733 P.2d 182 (Wash. 1987) (en banc).
29.See, e.g., Hadacheck v. Sebastian, 239 U.S. 394 (1915) (owner of brickyard shut down by local ordinance not entitled to compensation); cf. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) (property owner not entitled to compensation for regulation that destroys all economically beneficial value if the regulation tracks the common law of private or public nuisance).
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preventive rationale is not sufficiently powerful to justify shutting down existing nonconforming uses, at least not with some kind of transitional relief.
Zoning, like covenants running with the land, frequently encounters problems associated with changed circumstances. What was once thought to be an ideal location for single-family homes comes to be an area more appropriate for multifamily homes, or perhaps for commercial development. Changes can be made in zoning rules either through obtaining a variance or special exception, or through an amendment to the zoning plan. Variances and special exceptions are usually relatively small changes that affect only one or a small number of properties. Variances are more discretionary and can often be granted by administrators or by zoning boards of appeals. Despite their name, special exceptions are given as of right as long as the landowner satisfies the criteria in the zoning ordinance. If a larger change is required, the zoning plan must be amended. Such amendments require action by the local legislature, and thus are harder to obtain.
Is zoning beneficial overall? This is hard to answer in the abstract. Zoning carries with it the costs of rigidity and artificial scarcity of land but may be more effective than nuisance or covenants in dealing with severe spillover problems—although nuisance and covenants have their defenders. The fact that incumbent homeowners favor zoning is not dispositive on the question of overall welfare: People squeezed out of the housing market because of zoning’s contribution to scarcity and higher cost do not have votes in local politics. At best, they are represented by developers who would like to cater to their demand. Recent empirical work suggests that in California and the urban Northeast, zoning increases housing prices significantly through artificial scarcity. In other areas, housing more directly reflects the costs of construction.30
30.Edward L. Glaeser & Joseph Gyourko, The Impact of Building Restrictions on Housing Affordability, 9 Econ. Pol’y Rev. 21 (June 2003).
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As zoning laws have grown older, problems of changed circumstances have become more acute. Frequent recourse to variances and amendments eventually led to a second conception of how zoning might work, which has come to be known as the planned unit development (PUD).
In contrast to Euclidean zoning, which is grounded in the idea of a comprehensive plan for the entire community devised by experts, the PUD is based on the idea of a negotiated bargain between developers and local political authorities.31 Typically, a developer will approach a city with a proposal to build a new subdivision or shopping center, or to redevelop an existing neighborhood. City authorities and the developer will then negotiate a plan for the development, including not just private spaces such as houses, apartments, and commercial areas, but also open spaces, public parks, streets and sidewalks, and even schools and other community facilities. The city authorities are understood to have the power to veto the development, and they use this leverage to obtain promises that will provide benefits to the community. The developer, of course, can always back out of the project, and will use this leverage to try to maximize the economic return from the development. The result is a negotiated compromise, which generates the plan that governs the development, but does not affect other areas of the municipality.
PUDs reflect a very different philosophy about how to regulate externalities than the one reflected in Euclidean zoning. Whereas Euclidean zoning is based on a philosophy of separating uses into discrete zones, a PUD typically incorporates a mixture of different uses in one area. This is thought to generate a more vibrant, diverse community than Euclidean zoning, which tends toward homogeneity. Whereas Euclidean zoning is driven by a desire to achieve comprehensive and rational planning, imposed from above, PUDs
31.See Carol M. Rose, Planning and Dealing: Piecemeal Land Controls as Problem of Local Legitimacy, 71 Cal. L. Rev. 837 (1983).
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are individually negotiated and yield a series of idiosyncratic projects that may or may not sum to a coherent whole. Whereas Euclidian zoning maintains a sharp distinction between public and private, with land use planning regarded as a public function governed by elections, laws, administrative rules, open meeting requirements, and judicial review, PUDs entail a mixture of public and private decision making, with some inevitable loss of transparency and public participation. Critics of Euclidean zoning hail PUDs as more flexible, realistic, and responsive to public needs. Critics of PUDs condemn them as a sell-out to interest-group influence at the expense of the general interest. The debate goes on, although the trend is clearly in the direction of greater use of PUDs.
Because zoning is a form of local regulation, there is nothing to ensure that the interests of outsiders are factored into the process. A particularly troubling claim is that zoning rules are designed, either deliberately or inadvertently, to exclude racial minorities and poor persons from locating in particular communities. For example, suburban communities often adopt zoning rules that require large minimum lot sizes for single family homes and impose extensive open space requirements, with little space allocated for apartments or multifamily units. The effect of such rules is to limit development to large, expensive homes that few minorities and no poor households can afford. The New Jersey courts have sought to combat these effects by holding that exclusionary zoning violates the state constitution, and by requiring communities to amend their ordinances to include more generous allocations for lowand moderate-income housing.32 These efforts at judicial reform have led to a prolonged tussle between the courts and the legislature over the proper remedy, with the result that the issue still remains unresolved. A few other states have made milder
32.S. Burlington County NAACP v. Twp. of Mount Laurel, 336 A.2d 713 (N.J. 1975).