Are local zoning, wetlands regulations “market oriented”?

At Thursday’s Pioneer forum on wetlands policy, one participant commented that tough local regulation of housing development IS market-oriented policy. The regulations raise the price of construction in the hinterlands and near wetlands, she argued, thus steering development to places it makes more sense – where there is infrastructure to support it.

On one level, yes, the local regulations do raise the cost of construction, and in that way they can work as a market-tool to slow construction, where that is the goal.

Problems on a few more levels, though. First, the local regulations are not, as she might hope, steering development towards downtowns and transportation corridors. Instead, localities too often use regulations to slow development both in ‘smart growth’ locations and in the hinterlands. Looks like the net effect has been to push growth further and further out to communities that haven’t yet adopted regulatory barriers. And to other states.

Second, there are far more cost effective and efficient ways to steer development away from wetlands and greenfields than making the regulatory process difficult to navigate. A 5-year permitting process is indeed a cost to developers – and a dead weight loss to society. The money spent on the process is wasted, instead of directed towards something with economic benefit.