Dividing lines and bottom lines: The forces shaping local land use

Over the past decade, planners and policy makers have increasingly raised concerns about the undue influence of fiscal criteria on local land use regulation. Local governments are presumed to be under increased pressure to use land use policy to maximize their revenue base. However, many forces shape development patterns among individual communities. Market conditions determine the nature of projects that are proposed. State policies establish basic revenue instruments, shape expenditure responsibilities and place limits upon local government actions. Within each community, the existing fiscal profile creates specific incentives and pressures that influence the treatment of new development. The non-fiscal characteristics of each community also fundamentally shape local land use policy.Therefore, this paper sets out to understand precisely how fiscal considerations impact land use patterns by unpacking this complex web of forces. A survey of nearly 300 medium sized cities was conducted to gather information on local planning practices. This information was combined with a wide range of socioeconomic data to evaluate each city's construction permitting patterns. In turn, a series of multinomial logit models were estimated to quantify the forces associated with clear preferences toward specific forms of land use. Finally, a small number of cities with clear permitting patterns were evaluated to illustrate the local land use policy dynamics in greater detail.The results reveal that, although real estate market conditions do indeed help explain development patterns, non-market forces are also significant. Specifically, cities' financial profiles do help explain their land use preferences. However, rising expenditure demands and statewide revenue limitation policies are associated with fiscally motivated policies, but structural incentives such as local sales taxes or heavy reliance upon property taxes were not. In addition to the local government finance, characteristics such as average household income and the share of residents who own their homes clearly shape land use outcomes.