Unintended consequences

A bill has been introduced in the Texas Legislature that would penalize cities for "down-zoning" property:  it would require cities to pay a property owner damages whenever zoning changes cause the property's market value to drop by more than 10%.

I think this is a bad idea. 

There's no question that down-zoning can be unfair to the property owner.  I'm sure we'll see plenty of instances in the upcoming VMU boundary "adjustment" process, as neighborhoods try to pull properties from the VMU district for their own selfish reasons.

There's also no question that this bill will all but eliminate the occasional down-zoning. Any down-zoning could reduce a property's value by 10%.  There will be plenty of appraisers willing to swear to that, at any rate.  This means that cities will have to negotiate -- or sue -- each potentially affected property owner every time they want to tighten up zoning.  As a practical matter, down-zoning will be too costly and cumbersome for cities to pursue, except in rare cases.

Down-zonings are relatively rare overall, though; the VMU process is a special case.   Almost all of our zoning controversies are over up-zoning. And this bill will give city councils perverse incentives in these cases.  They will understand that once they've given a property a particular zoning classification, it will be difficult to switch to a more restrictive classification.  If they zone property commercial, they can't count on being able to rezone it residential.  If they zone property multi-family, they can't count on being able to rezone it single-family.  In other words, you can ride up for free, but the ride down will cost you.

City councils will respond rationally to this incentive.  If given a choice between zoning property single-family or multi-family, they will choose single-family whenever possible.  They will be more skeptical of requests to up-zone property, since these decisions essentially will be irreversible.  And when they do up-zone property, they will increase the "entitlements" by the smallest increment necessary. 

In my opinion, most of our zoning problems today stem from widespread under-zoning.  We should be encouraging cities to up-zone.  This bill will do just the opposite. 

Comments

[M1EK]

To be fair, the VMU thing really doesn't qualify - it's more of a "neighbors don't want those properties to be upzoned".

And the downzoning phenomena, strictly defined as changing zoning from one category to another, more restrictive one, has been limited here to mostly cases where the property owner wanted it - IE large swaths of OWANA were zoned multi-family in the zoning spasm of the 1950s/1960s; but actual use continued to be single-family. Part of the OWANA neighborhood plan bargain was that we'd upzone (to MU) along commercial corridors (including West Lynn, i.e. interior) and support higher-density residential too and in return, we'd support property owners downzoning their own property to existing use (usually SF-3). They've been doing those downzonings for years since.

Part of the problem is that a lot of things that you or I might view as "downzoning" really aren't by law - such as the prohibition against garage apartments on lots < 7000 sqft in my own neighborhood (result of neighborhood plan). My zoning before and after is SF-3; but I lost a lot of development rights. Likewise with McMansion - zoning CATEGORY didn't change.

This might of course be a point of law which may be challenged at some point, but for now I think they'd claim (and somewhat supportably) that those things weren't downzoning.

Given that caveat, I can't think of any recent examples of downzoning other than by explicit request of the owner.

[AC]

Actually, the way the VMU ordinance reads, the VMU district overlays are in place now. The forthcoming "opt outs" will withdraw properties from VMU districts and technically will be zoning amendments. (That's staff's interpretation as well; they've asserted that there would have to be notice and a zoning hearing to remove a property from a VMU overlay district.)

You raise a good point about whether changing max. building size, accessory buildings, etc. is a change in "zoning classification." The bill doesn't define that term. I'm sure this will be the flash point. I could see someone arguing that a regulation is a change in zoning classification if it applies just to some of the properties within a zoning district.