March 6, 2018

When States Should Preempt Local Governments

Adam Millsap

Senior Affiliated Scholar

A proposed bill in California (SB 827) would override local zoning laws to allow more housing to be built near public transit routes, and this has sparked a spirited debate in California about the proper role of state government. Some support the bill and California’s right to overrule local zoning, arguing it will make housing more affordable while also helping the environment. Critics counter that the bill infringes on local autonomy and is an example of state overreach.

The debate about when states should overrule local governments—known as state preemption—is not unique to California. In a new paper published in the volume, Promoting Prosperity in Mississippimy co-author and I provide some guidance to state policy makers considering preemption.

First, it’s important to note that all local governments are ultimately subject to state control. Only the federal government and state governments have any constitutional authority. All cities, counties, school districts, and other forms of local government wield power at the discretion of the federal government or, more often, their state. So, from a legal standpoint, state preemption is acceptable.

But there are good reasons for states to allow local governments to implement their own policies. City officials and residents know what’s important to them and often have a better understanding of how to achieve their goals. The importance of local knowledge in good decision making is one reason why state officials should defer to local governments.

Another reason is that by allowing local governments to implement different policies, we get a better understanding of what works and what doesn’t. Successful policies that result from experimentation at the local level can then filter up to state governments or the federal government, while unsuccessful policies can be discarded before they are imposed on entire states or the country.

Different local policies also allow people to choose the government that’s best for them. In other words, people can vote with their feet. If all local policies were imposed on cities by state governments, there would be far less variety and many people would be worse off due to the lack of choices.

Along with these advantages, there are drawbacks to local control. Many local policies violate the important principles of generality and free exchange. Generality means that laws and regulations should apply equally to all people engaged in the same activity or living under the same government. Deviations from generality typically mean that a special privilege has been granted by the government to people or firms.

Free exchange means that people should be allowed to engage in consensual, voluntary interactions with others. Government policies can encourage such behavior by providing public safety and enforcing contracts via police and an effective court system.

Unfortunately, many local polices violate generality and inhibit free exchange via barriers to entry, price controls, and business practice mandates. Local zoning ordinances are a good example.

Case-by-case zoning exceptions can result in government-granted privileges for some. Because of the potential for abuse, some city planners argue that officials should explain the rationale behind any special-use or spot-zoning accommodation. While this reduces the danger of favoritism, it doesn’t eliminate the risk of special privileges.

Common zoning rules such as minimum lot sizes, maximum building heights, and minimum parking requirements also act as implicit price controls by reducing the supply of housing units, which raises prices. Combined with the case-by-case exceptions that can lead to government granted privileges, there are legitimate reasons for more state oversight of local zoning.

Additionally, zoning rules that limit the supply of housing are often demanded by residents who want to protect their home values and the character of their neighborhoods. And because only current residents, not potential residents, can vote in local elections, local politicians often fail to internalize the costs that restrictive zoning places on the broader state economy. State officials who take a broader view are more likely to overcome the exclusionary interests of local homeowners.

For these reasons, efforts in California to preempt some local zoning are a step in the right direction. Other local policies can be analyzed in a similar manner, and in doing so state officials are likely to find that some of them can be improved by some degree of state preemption.