Zoning Affects Buyers

Zoning is a big trigger word you will hear in the market today. But what does it mean, particularly for new home buyers?

Zoning was originally used to predominantly separate residential neighborhoods from industrial ones. But in the past 30 years, communities have used zoning laws in order to prevent new-home booms. That’s because they often want to preserve the look of their neighborhoods, limit the amount of through traffic, and avoid overtaxing social services such as public schools. People are being increasingly vocal, particularly about what they don’t want to see in their neighborhoods.

Zoning can also be used to keep prospective home buyers and renters out. Some places have put subtle restrictions in place, insisting houses are built on certain size lots, meaning developers have to build bigger, more expensive houses on them—essentially dictating who can afford to live there.

Some states like Massachusetts have enacted “anti-snob” laws, which require local governments to issue permits to developers if there wasn’t enough affordable housing in the area. Opponents simply don’t want to see certain structures built in their neighborhoods.

Zoning regulations carry a cost, which is often passed on to the buyers of new homes. Government regulations at every single level made up 24.3% of the final price of a new single-family home, according to a 2016 National Association of Home Builders report. The median price of a newly constructed home was $312,400 in April, which is 21.1% more than the $257,900 median price of an existing home.

More often than not, zoning rules are put in place to preserve the existing character of a neighborhood. Residents of a quaint suburb of modest, two-story homes generally don’t want to look out their windows to see manufacturing plants or brand new, gleaming high-rises next door. That’s why areas are usually zoned for residential, commercial, or industrial uses.

But zoning also constrains the supply of available housing in some cities, driving up prices to mind-boggling heights and forcing would-be residents to move farther and farther out. That’s why, all over the US, we have the issue of construction companies waiting to develop new areas to bring housing prices to a reasonable rate, but zoning laws are wrapping the processes in a lot of red tape. If you’ve found your dream home but it’s way out of your price range, then take the time to look up local zoning laws. They may be to thank for your troubles.