A theory of development controls in a ‘small’ city

This paper analyzes the implications of an institutional structure in which current residents of an urban area have the power to exercise control over the level and pattern of new residential development. We develop a general equilibrium spatial model of a ‘small’ urban area in which the current residents can control new residential development through a zoning policy determined by majority vote. The current residents are modeled explicitly as home owners, and are allowed to be arbitrarily different in tastes and endowments. The urban government is assumed to provide a public good for its residents, the level of which is also determined by majority vote.The ‘optimal’ development control policy from the point of view of a particular current resident is determined and the allocation resulting from a majority vote of the current residents is described for both head tax and property tax systems. Efficient development control policies are also analyzed.