Insurance and Non-Conforming Land Use (Note 1)

The purchase of a residential home carries the risk of adjacent properties being rezoned in a manner creating negative externalities reducing the value of nearby residential homes. In most municipalities, appeals against rezoning are a costly and time consuming activity both for appellants and the public administrative bureaucracy. In this paper we establish the framework to analyze the creation of a residential insurance arrangement that has the potential to reduce the costs associated with appeals to restrict rezoning