On 75 percent or more of the residential land in most major American cities it is illegal to build anything other than a detached single-family home. 95.8 percent of total residential land area in California is zoned as single-family-only, which is 30 percent of all land in the state. Restrictive zoning regulations such as these probably lower GDP per capita in the US by 8-36%. That’s potentially tens of thousands of dollars per person.

Map of land use in San Jose, California. Pink is single family only (94%)

The legal authority behind all of these zoning rules derives from a 1926 Supreme Court decision in Village of Euclid v. Ambler Realty Co. Ambler realty held 68 acres of land in the town of Euclid, Ohio. The town, wanting to avoid influence, immigration, and industry from nearby Cleveland, passed a restrictive zoning ordinance which prevented Ambler realty from building anything but single family homes on much of their land, though they weren’t attempting to build anything at the time of the case.

Ambler realty and their lawyer (a prominent Georgist!) argued that since this zoning ordinance severely restricted the possible uses for their property and its value, forcing the ordinance upon them without compensation was unconstitutional.

The constitutionality claims in this case are about the 14th and 5th amendment. The 5th amendment to the United States Constitution states, among other things, that “private property [shall not] be taken for public use, without just compensation.” The part of the 14th amendment relevant to this case just applies the 5th to state and local governments.

There are two lines of argument in the case. First is whether the restrictions imposed by Euclid’s zoning ordinance constitute “taking” private property at all. If they are taking, then the 5th amendment would apply, e.g when the govt takes land via eminent domain, they need to compensate property owners. However, even government interventions that do take don’t always have to offer compensation. If the government, say, requires you to have an external staircase for fire egress, they don’t have to compensate you because it protects “health, safety, and welfare” which is a “police powers” carveout from the takings clause of the 5th amendment. The other line of argument in the case is that zoning ordinances, while they do take from property owners, do not require compensation because they are part of this police power.

Police Power

Let’s start with that second question: whether zoning laws count as protecting health and safety through the police power or are takings that require compensation. A common rhetorical technique is to reach for the most extreme case of zoning: a coal powered steel foundry wants to open up right next to the pre-school, for example. Conceding that this hypothetical is a legitimate use of the police power does not decide the case, however, because Euclid’s zoning ordinance goes much further than separating noxious industry from schoolyards.

The entire area of the village is divided by the ordinance into six classes of use districts, U-1 to U-6; three classes of height districts, H-1 to H-3, and four classes of area districts, A-1 to A-4.

U-1 is restricted to single family dwellings, public parks, water towers and reservoirs, suburban and interurban electric railway passenger stations and rights of way, and farming, noncommercial greenhouse nurseries and truck gardening;

U-2 is extended to include two-family dwellings;

U-3 is further extended to include apartment houses, hotels, churches, schools, public libraries, museums, private clubs, community center buildings, hospitals, sanitariums, public playgrounds and recreation buildings, and a city hall and courthouse;

U-4 is further extended to include banks, offices, studios, telephone exchanges, fire and police stations, restaurants, theatres and moving picture shows, retail stores and shops … public garages for motor vehicles, stables and wagon sheds and distributing stations for central store and commercial enterprises;

U-5 is further extended to include billboards and advertising signs, warehouses, ice and ice cream manufacturing and cold storage plants, bottling works, milk bottling and central distribution stations, laundries, carpet cleaning, dry cleaning and dyeing establishments … wholesale produce markets and salesrooms;

U-6 is further extended to include plants for sewage disposal and for producing gas, garbage and refuse incineration, scrap iron, junk, scrap paper and rag storage, aviation fields, cemeteries, crematories, penal and correctional institutions, insane and feeble minded institutions, storage of oil and gasoline, and manufacturing and industrial operations of any kind other than, and any public utility not included in, a class U-1, U-2, U-3, U-4 or U-5 use.

The height and area districts set maximum height limits and minimum lot sizes within each of these land use districts.

The health and safety argument which justifies separating the industrial activities in U-6 from all the rest does not apply to separating all of the uses enumerated in U-1 through U-5 nor do they justify requiring buildings to be under 35 feet and on 5000 square foot lots. Cities around the country and around the world mix land uses, building heights, and lot sizes with no ill effects on health or safety. Indeed, mixed use cities may have improve health and safety by reducing driving and putting empty lots to use which reduces crime.

Judge Westenhaver, the district court judge who found Euclid’s zoning ordinance unconstitutional before being overturned by the supreme court, agrees in his ruling that health and safety are not the main motivations for Euclid’s zoning laws:

The plain truth is that the true object of the ordinance in question is to place all the property in an undeveloped area of 16 square miles in a strait-jacket. The purpose to be accomplished is really to regulate the mode of living of persons who may hereafter inhabit it. In the last analysis, the result to be accomplished is to classify the population and segregate them according to their income or situation in life … Aside from contributing to these results and furthering such class tendencies, the ordinance has also an esthetic purpose; that is to say, to make this village develop into a city along lines now conceived by the village council to be attractive and beautiful.

The specter of extreme racial segregation in addition to this class segregation also looms large behind the motivations and uses for these zoning ordinances. None of these goals are legitimate uses of the police power. Neighborhood character is not health and safety.

The extent of the “police power” exemption to the 5th amendment is one of the most ambiguous, important, and frequently debated issues in US court precedent. Despite the broad spectrum of cases that rule on the police power, it is difficult to find another which supports Euclid v Ambler’s extraordinarily loose interpretation of “health, safety, and welfare.”

In Pennsylvania Coal Co. v. Mahon, the Supreme Court ruled compensation was required for a regulation that restricted mining in order to protect surface property from subsidence and collapse.

More recently, in Arkansas Game and Fish Commission v. United States, the Supreme Court unanimously ruled that takings liability is possible in a case where the Army Corps of Engineers flooded property in order to reduce flooding elsewhere, and thereby enable farmers in the region to get a longer growing season.

Mine collapse and flooding are far clearer risks to health, safety, and welfare than an apartment building or a corner deli, but the court ruled that regulations preventing these risks still constitute takings and that these takings are not exempted from the 5th amendment by police power. Therefore, regulating the far less dangerous construction of residential and commercial real estate must also be a taking that requires compensation.

Even the cases that find takings exempt by the police power don’t support the authority of local governments to enforce massive restrictions on what owners can do with their property just to undesirables out of their neighborhood.

In 1850, in American Print Works v. Lawrence, the New Jersey Supreme Court held that “a particular officer is authorized to destroy buildings where he shall judge it necessary to prevent the spread of a conflagration. . . [and that] it is a sufficient justification for the destruction of goods contained in such building, for which no compensation is provided.” In 1872, in the Slaughterhouse Cases, the U.S. Supreme Court upheld a New Orleans law which required slaughterhouses to move to the outer skirts of the city to maintain the cleanliness and health of the city as a valid exercise of police power.

Demolishing buildings to stop fires and keeping industrial slaughterhouses on the outskirts of the city are justified uses of police power. Demolishing buildings because they’re a few floors too high for your taste is not. The zoning rules that make multi-family housing illegal in 98% of all residential land in California are clearly not justified by the police power.

Taking

Since the argument from public safety is too weak to justify the breadth and specificity of Euclid’s zoning ordinance, the lawyers arguing the case also brought a second line of argument: that zoning restrictions aren’t takings at all. The basic argument being that because zoning doesn’t take the title of anyone’s land and doesn’t reduce the size of anyone’s holding, it’s not a taking. Judge Westenhaver again:

Property, generally speaking, defendant's counsel concede, is protected against a taking without compensation, by the guaranties of the Ohio and United States Constitutions. But their view seems to be that so long as the owner remains clothed with the legal title thereto and is not ousted from the physical possession thereof, his property is not taken, no matter to what extent his right to use it is invaded or destroyed or its present or prospective value is depreciated.

This goes against centuries of precedent on the meaning of property in the 5th amendment.

The right to property, as used in the Constitution, has no such limited meaning. As has often been said by the Supreme Court: “There can be no conception of property aside from its control and use, and upon its use depends its value.” See Cleveland, etc., Ry. Co. v. Backus.

The Supreme Court suggested that the property rights protected by takings principles includes a right to use, in the case of Yates v. Milwaukee, an agency of the City of Milwaukee sought to force the owner of riparian property bordering a river to remove a wharf he had built on his land, citing authority granted by a Wisconsin state law.

The Supreme Court ruled that Yates was “entitled to the rights of a riparian proprietor whose land is bounded by a navigable stream, and among those rights are access to the navigable part of the river from the front of his lot, the right to make a landing, wharf or pier for his own use or for the use of the public, subject to such general rules and regulations as the legislature may see proper to impose for the protection of the rights of the public”

Justice Samuel Miller’s opinion for the Court went on to say that if Milwaukee could bar a wharf merely by declaring it to be a nuisance, “[t]his would place every house, every business, and all the property of the city at the uncontrolled will of the temporary local authorities.”

The claim that zoning restrictions are not a taking also goes against the expert consensus among economists about the massive costs that zoning imposes on landowners.

Zoning ordinances which restrict the land uses available to landowners are takings just as much as eminent domain is. When used to separate truly noxious land uses from everyday life, these takings are exempted from the requirement for compensation by the police power. Most zoning laws go far beyond this, though, and attempt to separate ordinary and inoffensive land uses at an extraordinary degree of granularity. Retail shops and multi-family housing are not noxious to everyday life. Thus, this shallow motivation for zoning is not exempted by the police power.

Euclid v Ambler should be overturned or severely limited such that it’s application to single family zoning is no longer legal. Loosening the “uncontrolled will” that persnickety local government officials have over a large majority of the residential land in the United States would raise economic growth, lower inequality, and improve the decision record of the Supreme Court.