Whether you're buying an existing property, developing empty land, or just looking to build a small structure on a single lot, zoning can make all the difference. Most locations have several zoning types that define what kind of structures and uses are allowed on any parcel. The most common zoning approach is known as Euclidean zoning.
What is Euclidean zoning?
The early days of planning and zoning (P&Z) were pretty much chaos. Large cities like Los Angeles and New York City were experimenting with P&Z, with very mixed results. Sometimes a parcel's zoning was based on its historic or previous use -- which did nothing to improve already haphazard city planning in the early 1900s. Property owners, tenants, developers, and municipalities continually argued over what impact, if any, zoning should have. Then, in 1922, the Supreme Court weighed in.
In Euclid v. Ambler, the Ambler Realty Co. alleged that the Village of Euclid, Ohio, was destroying property values with zoning laws. Ambler claimed that zoning restrictions resulted in the city effectively taking the company's land since it couldn't be used in the manner for which it had been purchased.
The Supreme Court ruled that these particular types of zoning ordinances, commonly known as single-use zoning, were legal under the local government's police power (in that they upheld safety, welfare, health, or moral standards) and were required for effective municipal planning. From there, Euclidean zoning spread nationwide and remains the dominant form of zoning used today.
Single-use zoning types
Zoning types and definitions vary from one municipality to another, but they tend to fall into the same broad categories. You can pretty much always count on seeing residential zoning, commercial zoning, industrial zoning, agricultural zoning, and mixed-use zoning. There are also usually special zoning classifications for areas like historical districts, as well as spot zoning, where one or more parcels have a designation different from the surrounding area.
Single-use zoning is just that. A property with a given zoning type, say, commercial, can be used only for commercial purposes, as defined in the zoning ordinance of the governing body. Most zoning districts are further split into smaller categories that describe the subtype of use, often divided by population density, traffic density, or expected noise and emissions.
Zoning types, explained
Each zoning type has a specific purpose. Those are meant to help keep similar buildings and uses together, allowing for better urban planning, rather than having different types of structures scattered across the landscape. They include:
- Residential: Residential zoning is used for housing. Many areas divide residential zoning into categories such as single-family, multifamily up to four units, and apartments.
- Commercial: Commercial zoning is for business use. Sometimes commercial zones are subdivided according to the amount of traffic expected for the business type. So you may have one zoning designation for offices and yet another for big-box retail.
- Industrial: In zoning, the industrial label is a catchall for manufacturing, storage, and other noisy, less attractive building types. Warehouses are usually categorized as industrial, as are factories.
- Agricultural: Agricultural zoning is all about the farms. These zones have rules about how far apart structures must be, how the land is to be maintained, and what types of agricultural uses can be present, based on the zoning subtype.
- Mixed-use: Mixed-use zoning combines one or more of the above zoning types (or others) and allows different property uses together in one area. You might see this in a busy downtown district with commercial (businesses) at street level and residential (apartments) above the storefronts.
The Millionacres bottom line
Understanding zoning can help you avoid expensive mistakes when choosing real estate to purchase, regardless of your final intentions for it. Investing in a property in the wrong zoning district for your purpose can leave you frustrated. You may find your project stalled and hemorrhaging money as you apply for spot zoning (rezoning is a long, difficult process) or try to get out of the investment while preserving as much value as possible.
If you're just getting started with commercial real estate, it's important to know the zoning limitations on any property you intend to purchase, especially if you plan to upgrade or remodel it. Just because that building was a retail facility in the 1920s doesn't mean it's still zoned for that purpose. Investigate before you invest.