Association for Public Policy Analysis & Management

In this paper, I examine the effect of land use regulations such as minimum lot sizes on educational outcomes of elementary school children. The salience of land use regulations becomes apparent whenever residents fiercely oppose propositions to rezone even small parts of their neighborhood. There is evidence that stricter regulations cause higher prices of land. I focus on differences that remain even in the absence of heterogeneity in per pupil resources: if land use regulations lead to sorting of households into neighborhoods then the characteristics of classroom peers differ by school attendance area. To my knowledge this is the first paper considering that land use regulations can affect educational outcomes in a neighborhood based school system. Specifically, I consider two sub-questions: First, how do land use regulations affect the composition of neighborhoods? Second, how does the composition of the neighborhood affect educational outcomes through classroom peers? Viewing high levels of inequality in education and in residential communities through the lens of land use regulations has important policy implications.

To answer how land use regulations affect educational outcomes, I match administrative school data on public elementary school children from Wake County, North Carolina, with lot-level data on minimum lot sizes using the students' geo location. To find the effect of minimum lot size regulations on the composition of the neighborhood, I employ a boundary discontinuity design to estimate the effect of minimum lot sizes on neighborhood income sorting. I then use quasi-experimental variation from a bussing policy in Wake County, North Carolina, to identify the effect of peers' characteristics on educational outcomes of elementary school children.

Initial results confirm that land use regulations strongly affect the composition of a neighborhood and that regulations alone can impact educational outcomes significantly through peers in the classroom. I find that minimum lot sizes cause sorting on income that is at least as big as the sorting at well-studied boundaries like school attendance zone boundaries. A decrease in allowed density by one dwelling unit per acre leads to $4,000 more neighborhood income. Since these effects are estimated on boundaries within school attendance areas, sorting is being induced among households with the same preferences for education. Using exogenous variation from school bussing experiments in Wake County, I estimate an effect of a decrease in peers' average income by $10,000 leading to a decrease in math test scores by 0.027 standard deviations.

In a back-of-the-envelope calculation, I consider the counterfactual that one block group within a school attendance area is rezoned to allow a higher residential density. How does the rezoning affect a student already at that school but living in a block group that is not rezoned? There is a slight negative effect of the rezoning on students who were already at the school. However, the potential benefit to a student moving in to the rezoned area and now going to a school with richer peers is tremendous if one assumes that moving households come from an income range targeted by inclusionary zoning policies.