How Zoning Rules Acts as Homeowner Insurance

An excellent section in Abundance1 discusses the risks involved in buying a house and how they are often mitigated.

The authors quote a passage from Fischel2, noting that buying a home is akin to pouring your life savings into one undiversified company, highly vulnerable to local risks like neighborhood changes or shifting municipal policies.

They then suggest that public policy, particularly zoning rules, has evolved to mitigate these risks. These rules – such as common local regulations dictating minimum lot sizes, preventing the construction of multi-family or public housing projects, and mandating extensive parking – aren't just arbitrary, according to this view.

Instead, they function to protect the existing character and, crucially, the property values of an area. They act as a buffer against changes that could negatively impact a homeowner's massive, illiquid investment.

By limiting development and maintaining the status quo, zoning effectively provides a form of insurance for homeowners. This use of bureaucratic structures to safeguard existing investments echoes broader discussions on how such practices can preserve wealth, particularly among established groups3.

  1. Klein, Ezra and Thompson, Derek (2025). Abundance, Avid Reader Press / Simon & Schuster. ↩

  2. Fischel, William A. (2015). Zoning Rules!: The Economics of Land Use Regulation, Lincoln Institute of Land Policy. ↩

  3. Shiffer-Sebba, D. (2025). Keeping the Family Fortune: How Bureaucratic Practices Preserve Elite Multigenerational Wealth. American Sociological Review, 90(2), 291-317. https://doi.org/10.1177/00031224251319001 (Original work published 2025) ↩