When restrictive economic zoning leads to racial segregation

Abstract Scholars have shown that restrictive zoning is correlated with racial segregation, but we lack an understanding of why this occurs. I argue that the link operates through the clustering of housing costs generated by land use regulations. Using an agent-based model, I find that restrictive zoning produces racial segregation, but only when residents have homophilic preferences and unequal wealth. Then using a novel dataset of parcel-level zoning codes, I show neighborhoods that are restrictively zoned have higher home values, are less diverse, wealthier, and have more homeowners. Finally, I show that cities vary in the degree to which zoning regulations are geographically clustered. Collectively, these results indicate that land use regulations contribute to the maintenance of racial segregation across neighborhoods.