How Zoning Regulations Benefit Communities

Now that we’ve spelled out what zoning laws are and why they have come into existence, let’s go deeper into the impacts of zoning. Though zoning is primarily used to benefit society at large—the general public—determining the best use of the property is not always favorable for the various interest groups involved, particularly REITs (real estate investment trusts). Despite these private interests, zoning has many advantages if implemented fairly. We’ll discuss the various benefits of zoning in this part of our series.

As we discussed in the preceding part of this series, zoning laws aim to ensure that a lot or a new building in the vicinity to be in coherence with the area, thus protecting the public interests of the existing neighborhoods. Below are several other benefits that we should specify:

• Zoning enforces many restrictions like height limitations, space requirement, building size, and other development standards. These restrictions and standards help prevent overcrowding in the specified area by limiting the amount and sizes of structures and parcels.
• Zoning protects existing property values by preventing incompatible uses of a property. For example, a dance club would not be allowed near an elementary school.
• Zoning keeps buildings from being built too close to each other.
• Zoning provides systematic lot arrangement.
• Zoning protects recreational areas and allows for more open spaces in the neighborhood.
• Zoning has aesthetic values in its aim to enhance the beauty of a community by requiring landscaping, buffers, and parking lot improvements.
• Zoning protects residential properties from commercial development.

Zoning also makes properties attractive to developers like Lennar Corporation (LEN), D.R. Horton (DHI), Toll Brothers (TOL), and PulteGroup (PHM). Homebuilders prefer to locate their new projects in areas where the project is compatible with the surroundings and accepted by the community.

Investors can take exposure to the real estate sector by investing in REITs like AvalonBay Communities (AVB) or by investing in funds like the Vanguard REIT ETF (VNQ), which has about 3.4% of its total portfolio in Avalonbay Communities (AVB).

Now that we’ve glanced at the pros of zoning regulations, let’s take a look at the cons in the next part.