Zoning and the Political Economy of Local Redistribution

This paper examines the effects of a zoning regulation on local redistribution in a multicommunity model. Each community chooses, by majority vote within the community, a property tax rate. The proceeds from this tax are then redistributed within the community on a per capita basis. Individuals that differ in their initial income choose a community in which to reside and how much housing to purchase. We examine the effects on allocations and welfare of a zoning regulation that allows one of the communities to set a minimum housing purchase for each of its residents. Two cases are analyzed: In the first, the zoning regulation is taken as exogenous. In the second, the level of zoning is endogenously determined via majority vote. Some of our findings are: (i) Contrary to results obtained in a model with no zoning, wealthy communities may engage in greater redistribution than do poorer communities. (ii) Zoning may cause the wealthy community to become less, rather than more, exclusive. (iii) Welfare effects are not monotone in income. (iv) It is possible for the wealthiest individuals to be made worse off by the imposition of zoning.