Hierarchical Zoning, Incompatible Uses and Price Discounts

Abstract

This study examines an aspect of hierarchical zoning. Hierarchical zoning, unlike mutually exclusive zoning, is uni‐directional in that it protects upper‐level residential uses from nonconforming, non‐residential uses but not vice versa. The result is that the lower‐level zones can be a mixture of several nonconforming, incompatible uses. This unique attribute of hierarchical zoning offers a window of opportunity for choices for affordable housing at affordable locations. Using hedonic analysis, empirical evidence shows that huge price discounts (over 15%) are associated with apartments that are situated in nonconforming zones. Arguments here support more flexible zoning.