A fixed-effects model of the impact of minimum-lot-size zoning on residential development

Minimum lot size zoning has a long history of implementation as a growth control tool at the local level. But due to the relative scarcity of land use data with high quality, the actual effect of minimum lot size on residential land development is ambiguous and further investigation based on explicit empirical evidence is required. Our panel data on acres of land use in 83 New Jersey Highlands communities in 1986, 1995 and 2002 provide an ideal platform for exploring the true relationship between large-lot-zoning and residential land consumption. In this paper, we first construct a theoretical framework that illustrates why the relationship should be nonlinear, providing the correct specification for the independent variable of interest. Then two land use share models--the fixed effect model and OLS with a time dummy--are applied to the panel dataset. Results from a series of model adequacy tests demonstrate clear superiority of the fixed effect model. The empirical results based on the fixed effect method suggest that residential land development first increases with minimum lot size at a diminishing rate, and it declines after reaching the maximum point at the minimum lot size of 5.298 acres. Our results provide preliminary evidence that large-lot-zoning can only reduce residential growth if it is set at a relatively high level. The results also imply that up-zoning can be an effective tool for reducing land consumption. Key words: fixed effect, growth control, minimum lot size, land use, large-lot-zoning, regional heterogeneity, residential development, urbanizationM.S.Includes bibliographical references (p. 41-44)