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PLAIN ECONOMIC SENSE
For release after Dec. 7, 1998
Column 358
Urban Growth Boundaries and Exclusive Agricultural Zoning
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities
Currently, 14 states have urban growth boundaries. Oregon has the longest experience with this land use policy tool and has gained a national reputation for its experiences. While what happens inside the urban growth boundary receives most of the attention, Oregon has developed a complementary program for exclusive agricultural zoning outside of the urban boundary that goes hand in hand with a statewide comprehensive approach to land use planning.
How do Oregon's programs work? The concept behind the urban growth boundary is to require all cities in the state to establish a planning boundary based on 20 year growth projections of population and the amount of land that would be needed for urban development. The Portland area updates its plan every five years. State and local policies encourage higher densities of residential development inside the urban growth boundaries. They also discourage urban development outside of the urban growth boundaries.
Mandatory exclusive agricultural use zoning for farm and range lands exists in many areas outside of the urban growth boundaries. This means that farmers in agricultural zones are limited only to uses allowed for the agricultural use zone. In addition, farmland owners cannot subdivide parcels below the established regional minimum parcel size. Property tax assessments based on use value are tied to the exclusive agricultural use zoning designation.
How has the Oregon system worked? According to some statistical analyses, it has largely succeeded in blocking urbanization of farmland outside urban growth boundaries. In the Portland metro area there are signs that planning has greatly increased density of residential development. In some high growth areas with high value farmland the program has sharply slowed the infiltration of noncommercial hobby farms and other low-density residential development. However, in other regions the impact on stopping rural residential conversions has been slight-- suggesting that local preferences still play a role in defining the goals of implementation.
For comparison, Iowa currently exempts agriculture from zoning. For Iowa farmers who only want to farm, there would be little difference. The big difference is for those who want to speculate and cash in on urban development prices. In Iowa, subdividing and "down zoning" is considered normal practice in many rural areas outside of the city limits. Down zoning applies in situations when industry wants to locate a plant or rural residents want to build new houses on open space land that currently is zoned agriculture. Such projects must go to the local zoning board for approval of a change in use. The practice of downgrading the zone gives the local governing boards the power to allow in preferred industries and rural residences and to keep unwanted industries out.
In contrast, Oregon's exclusive agricultural zoning means that designated farmland parcels cannot be subdivided below minimum standards, nor can the zoning designation be easily changed to other uses. Only permitted uses are allowed in these areas and down zoning doesn't occur very often. As a general rule, a new farm residence cannot be built unless another is demolished or a case is presented and approved by a local zoning board.
If Iowa were to adopt the Oregon style system with urban boundaries and exclusive agricultural use zoning districts, Iowa farmers in the designated locations could farm their ground with less fear of encroachment or the nuisance suit problems created by intermixing urban development with farming practices. Iowa farmers in the agricultural use zones could continue to have their farmland taxed on the basis of use value which is 30 percent of market value.
However, Iowa farmers would not be able to sell their farmland for urban development prices in the agricultural use zones. At a recent national conference on land use policy, a former official with the Portland land use agency indicated that the value of farmland for development inside the urban growth boundary was ten times the value of farmland outside of the boundary.
It is also interesting to note that early opposition to the Oregon system by developers and agricultural interests has moderated in recent years. While some local county organizations still oppose the Oregon's highly regulatory approach, the Oregon Farm Bureau and several statewide commodity organizations officially support the state's approach to land use policy. In addition, many developers now feel the present system adequately provides land with proper zoning designations for development. The higher prices paid for the development land are generally passed on to the end user. So in theory, development land tends to become more scarce, new construction tends to become more dense and housing tends to become a little less affordable at the margin.
Edelman is a professor of economics and an extension public policy specialist at Iowa State University.
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