A fixed effects logit model of rural land conversion and zoning

We examine the effect that public facilities moratorium and minimum lot size zoning have on the conversion of rural land to residential subdivisions in fast-growing exurban areas using a natural experiment approach. Zoning ordinances are the most common growth control policy at the local level and are hypothesized to be one of the most important factors in determining the likelihood of residential development. We investigate the role of minimum lot size zoning by taking advantage of plausibly exogenous changes in zoning policies that altered the developable status of some rural land parcels in an exurban county of Ohio. A discrete-choice econometric model of land use conversion is estimated with a parcel-level temporal dataset, using conditional maximum likelihood estimation to account for the panel structure of the data and fixed effects to control for unobserved heterogeneity. Empirical evidence indicates that minimum lot size zoning has a negative effect on the likelihood of rural land conversion and that this effect is large in magnitude. Specifically, we find that a parcel that is subject to a minimum lot size zoning is between 4.4 and 6.4% less likely to be converted to residential land use. In comparison, results from a pooled model, in which the unobserved heterogeneity is left uncontrolled, suggest that minimum lot size zoning has a relatively small negative effect on the conversion probability of undeveloped land parcels. Thus, estimates that do not control for unobserved heterogeneity are likely biased toward zero.