Commercial Zoning - History of Business in the U.S.
Definition: Land-use laws regulating the permissible locations and activities of businesses
Significance: Commercial zoning, nonexistent in early American history, has come to play a crucial role in the land-use patterns of American business over the last century. Businesses are confined to certain locations, commercial operations are regulated, and residential subdivisions are developed in accord with zoning ordinances.
During the early years of the United States, property rights in land were considered nearly absolute. The law allowed commercial property owners the untrammeled acquisition, use, and disposal of their land. Thus, commercial enterprises of every kind— stores, factories, offices, hotels, and restaurants—were free to locate in any population center, even among residences, churches, schools, and parks. Commercial usage of property was largely unrestrained except for inherently dangerous industrial processes, which might be subject to nuisance laws.
Occasional controls on height, size, and noxious uses of commercial buildings were enacted around the turn of the twentieth century. In 1916, New York City enacted the first comprehensive zoning plan that divided the city into “business,” “residential,” and unrestricted districts. By 1925, over five hundred cities had implemented zoning plans classifying land by the permitted use, bulk, and shape of any commercial buildings located on it. Some property owners, especially those in the real estate industry, were alarmed by what they claimed to be an intrusion into the constitutional right of landowners to hold and utilize property wherever and however they saw fit. In Euclid v. Ambler Realty (1926), the U.S. Supreme Court rejected a challenge by a real estate firm to the constitutionality of zoning. Within five years, thirty-five states, supported by the federal government, had passed zoning laws that regulated the geography and patterns of commerce.
The authority for commercial zoning derived from state legislation under the inherent power of governments to regulate the use of property for the health, safety, morals, and welfare of their citizens. Zoning codes were usually the work of local city councils and commissions, assisted by professional land-planning experts. Over the years, numerous administrative procedures were created to allow for individual variations from zoning plans. Businesses could follow these procedures for obtaining individual relief from zoning regulations by seeking an amendment, variance, conditional use, special exception, or rezoning from the municipal board authorized to make adjustments. Such a process only emphasizes, however, how much zoning mechanisms defer market forces and business decisions— for better or worse—to the deliberations and politics of local planners and citizen groups.
Postwar Commercial Zoning
Since World War II, almost all urban areas in the United States have employed commercial zoning plans. In addition, the extensive postwar creation of suburbs and housing developments throughout the United States has followed the pattern of commercial zoning, regulating the number of residences, family composition, acreage, building size, lot size, aesthetic considerations, historic preservation, and recreational usage of residential life. Perhaps the central characteristic of zoning is that it excludes industry, commerce, temporary housing, and even apartment buildings from bedroom communities and single-family neighborhoods. Industrial performance standards are a form of commercial zoning that seek more specific regulations of industrial uses. Industrial performance standards mandate explicit requirements in controlling such industrial by-products as noise, smoke, smell, vibration, dust, glare, heat, radioactivity, and emissions.
Communities have used commercial zoning to preserve or change their economic demographics. Zoning has long been used to attract industrial uses so as to increase the municipal tax base. Some zoning plans provide for total exclusion of commercial enterprises from residential zones. Municipalities havemadeuse of both cumulative zoning and exclusive zoning. Cumulative zoning, also known as “Euclidean” zoning, allows “higher” uses in lower-rated zones, such as permitting residential uses in commercial and industrial zones. Exclusive zoning permits only the designated use, for example, allowing only factories to locate in industrial zones. Cumulative zoning was the norm in early zoning plans; exclusive zoning has been the modern trend. Related to commercial zoning are the creation of “enterprise” zones, which are economically disadvantaged and blighted areas. Businesses are eligible to receive commercial and tax incentives if they remain in or relocate to enterprise zones.
Neighborhood homogenization, suburban sprawl, overheated housing development, and environmental degradation have been blamed on rigid, or misguided, or self-interested zoning laws. Commercial zoning raises both economic and legal issues of its own. Froman economic perspective, commercial zoning has its critics who claim that segregating commercial uses benefits neither business nor residential districts. It has been claimed that forcing residents into their cars for a drive to a supermarket or to a doctor’s office saps towns and villages of the diverse commercial and housing patterns that make for charming and habitable cities. Likewise, restrictive commercial zoning may give rise to legal challenges for anticompetitiveness, infringement of commercial free speech, and racial and economic discrimination.
In response, some states have required municipalities to allow their fair share of commercial usage as well as low-income housing. Planned unit developments (PUDs), beginning to appear in the United States during the 1960’s, benefit from relaxed zoning requirements in exchange for keeping open space in air or on land. During the 1970’s, municipalities began to compensate businesses for the restrictions imposed on them with transfer development rights (TDRs), which grant development rights in other parcels of land. The use of TDRs as compensation found support in the landmark historic-preservation case Penn Central Transportation Co. v. New York City (1978).
In the last twenty years, many municipalities have strictly regulated the kinds of businesses that can locate in certain commercial zones. For example, they have sought to confine adult entertainment businesses to red-light zones, if not to ban them entirely. Some of these zoning ordinances have been challenged on First Amendment grounds. Likewise, zoning that seeks to reduce commercial competition by restricting new or competing businesses from locating in certain areas has been found to violate federal antitrust laws. Although commercial zoning began in urban areas, one of the most heated areas of contention in contemporary zoning is in agricultural districts. Much of the land outside urban areas has been zoned for agricultural and rural use. With the extension of residential development into these rural areas, land developers and subdividers have clamored for rezoning to accommodate new housing; land conservationists have fought to maintain and often strengthen zoning regulations to preserve farmland and rural areas.
Ellickson, Robert, and Vicki Breen. Land Use Controls: Cases and Materials. 3d ed. New York: Aspen, 2005. Collection of judicial cases and notes regarding commercial zoning and other issues of land use.
Elliot, Donald L. A BetterWay to Zone: Ten Principles to Create More Livable Cities. Washington, D.C.: Island Press, 2008. Identifies what the author regards as problems with zoning that interfere with urban development and suggests solutions.
Fischel, William. The Economics of Zoning Laws: A Property Rights Approach to American Land Use Controls. Baltimore: Johns Hopkins University Press, 1987. Economic analysis of commercial zoning.
Platt, Rutherford. Land Use and Society: Geography, Law, and Public Policy. Rev. ed. Washington, D.C.: Island Press, 2004. Comprehensive survey of the legal, cultural, and geographical issues facing land use and zoning planners.
Wolf, Michael Allan. The Zoning of America: Euclid v. Ambler. Lawrence: University Press of Kansas, 2008. History of the landmark U.S. Supreme Court case brought by an Ohio real estate company challenging the constitutionality of zoning.
See also: construction industry; Land laws; Commercial real estate industry; Residential real estate industry; Supreme Court and land law.