The effect of zoning on land value

Two types of zoning are identified: externality zoning, which is designed to achieve a Pareto efficient pattern of land use, and fiscal zoning, which is designed to accomplish some other objective. (The latter, for instance, may be aimed at minimizing the tax rate in a community.) The paper shows that it is not in general possible using a priori theory to predict the sign (positive or negative) of the effect of either of these forms of zoning on aggregate land value in a community. It is shown, however, that under plausible assumption it can be argued that zoning as currently practiced in many U. S. communities probably has the effect of lowering aggregate land values in the communities doing the zoning.