Doing Business 2015 Going Beyond Efficiency Zoning and urban planning Understanding the benefits ound regulation of construction factors as building size, height, shape Zoning—the process of planning helps strengthen property rights, and color; building location; and urban for land use across geographic S 5 areas—can help avoid the mixing protects the public from faulty densities. building practices and contributes to of incompatible land uses. This has the process of capital formation.1 But Zoning regulations can provide a useful both environmental and economic benefits. if procedures are too complicated or framework for investors and develop- costly, builders tend to proceed without ers by specifying the most appropriate Zoning practices vary widely a permit.2 By some estimates 60–80% location for their projects before they around the world. Economies with of building projects in developing econo- apply for a construction permit (figure an efficient and effective zoning mies are undertaken without the proper 6.1). They can also help municipal process make zoning maps of permits and approvals.3 authorities establish a consistent cities accessible to builders. Others and predictable basis for granting limit access to the building permit For many entrepreneurs, construction construction permits and approving authority, which checks the zoning regulation is an important consideration or rejecting construction proposals. compliance of permit applications. Still others have no zoning system when deciding where to establish their Having an up-to-date zoning system is at all. business. According to a competitive- therefore essential not only in support- ness report by KPMG, construction ing the coordination among agencies Among OECD high-income costs are the 5th most important factor that is needed for prosperous urban economies the process for obtaining determining the location of a start-up planning but also in ensuring efficiency a building permit, as measured in the United States and the permitting in granting construction permits. Also by Doing Business, takes 19 fewer process is the 17th most important.4 important is that such zoning systems days on average in those where the One element of construction regulation be developed through a consultative process includes zoning procedures is zoning, which regulates the location process with broad participation, to than in those where it does not. and use of certain types of buildings ensure that they benefit all social In New Zealand all municipalities within a city. groups. have a detailed, up-to-date zoning plan that has been approved through a process with intensive public involvement—including public HOW DOES ZONING RELATE HOW CAN ZONING AFFECT hearings to allow residents to offer TO CONSTRUCTION ECONOMIC DEVELOPMENT? suggestions or objections. PERMITTING? Through zoning, governments can Guatemala, a recent success story, Zoning is an essential tool in successful ensure the proper use of land and introduced a land management plan urban planning. Maps divide com- avoid mixing incompatible land uses. in its capital city in January 2009. munities into different zones based Zoning has been used as a regulatory A new zoning system established on the types of uses allowed—such tool to respond to changing environ- zones based on the general use of as residential, commercial, industrial, mental and development conditions land, including mixed-use zones. public buildings, parks and green areas. as well, including flooding, rising sea In most economies with zoning plans, levels and the loss of infrastructure.6 each zone has its own ordinance gov- Zoning regulations that take into ac- erning development within that sec- count environmental threats such as tion. These ordinances determine such flooding protect citizens by ensuring 54 DOING BUSINESS 2015 FIGURE 6.1 Where does zoning generally fit into the construction permitting process? Builder decides on type of construction project. In some instances builder Builder obtains zoning approval (recorded by • ••••••••••••• as a must apply for a separate procedure only if builder is required to obtain zoning certificate or approval directly from the relevant agency). zoning approval for the intended location of the project. Builder prepares the necessary drawings and other required documentation. Builder applies for the necessary preapprovals for the project (if required), such as land use approval, environmental approval and fire safety approval (including any necessary inspections). The relevant authority consults the zoning maps of the city to determine whether the project will be built in an appropriate Builder applies for and obtains a building permit. location, based on its specifications. In some instances builder may consult the zoning maps while the relevant authority simply does a Builder begins construction and receives either random or phased inspections verification check when during construction by the relevant parties. reviewing the permit application. Builder completes construction and receives final inspection from the relevant parties to ensure that the construction was completed in compliance with building regulations and the conditions set forth in the building permit. Builder receives a completion certificate or occupancy permit, ensuring that the building is ready to be occupied. Builder applies for and obtains the final water and sewerage connection from the water and sewerage authorities. Source: Doing Business database. that future development keeps them municipalities include new areas for But where a zoning process is too and their possessions out of harm’s housing development and new indus- complex or restrictive, it can have an way. More generally, zoning plans can tries, zoning plans can help address adverse effect on factors such as hous- promote the conservation of energy the challenges associated with demo- ing supply and prices. Consider the ex- and natural resources, foster a greener graphic change and shifts in business ample of Sweden, where zoning policies environment, improve sustainability activity. In addition, municipal zoning mandate that municipalities must ap- and enhance the ability to adapt to can protect and improve the health of prove a detailed development plan for climate change. citizens by removing or minimizing pol- most housing projects before issuing a lution from industrial plants and con- construction permit. According to the A good zoning plan can help reduce tamination from landfills and sewage. Stockholm Planning Department and greenhouse gas emissions by cutting Zoning can help ensure an adequate an OECD study, more than half of all down on vehicle travel—such as by supply of safe water and the suitable construction projects—including most promoting higher-density development disposal of waste. And it can enhance apartment buildings—involve designing and concentrating residential develop- property values—by reducing pollu- or modifying a detailed development ment near job centers. A zoning plan tion, providing suitable light, avoiding plan.9 This can take 18 months on av- can also help reduce greenhouse gas overcrowding and traffic congestion, erage, according to estimates from the emissions by promoting an adequate developing green zones and offering municipality of Stockholm, and in 20% and accessible public transportation proximity to schools, hospitals and of cases it can take 3–4 years.10 Many system.7 By ensuring that certain other public necessities.8 researchers agree that administrative ZONING AND URBAN PLANNING 55 barriers to new construction are one automatically forwards the applica- scenario: a zoning system is still in of the 2 main factors (the other being tion to the Town Planning Department place and zoning compliance is still rent control policies) that have led to a for zoning approval, with no involve- verified, though not in the most ef- housing shortage in Sweden over the ment from the builder. In Belize the ficient way. Nevertheless, requiring past decade.11 Building Plan Committee of the Central verification of zoning compliance is Building Authority checks the permit better than having no zoning system at application to ensure compliance with all—with builders able to construct any zoning, environmental and fire safety type of project in any part of the city. WHAT ARE SOME GOOD requirements. PRACTICES IN ZONING? Thirty-six of the 65 economies require Recognizing the importance of zoning Neither of these processes requires builders to obtain approval to build in and urban planning, many economies the builder to take the extra step of their intended location before they can require builders to obtain some form actually obtaining a zoning approval receive a construction permit (table of zoning or urban planning approval before applying for a building permit— 6.1). Twenty-two of these 36 economies before building or even before obtaining a good-practice scenario if completed require a zoning permit as this form of a construction permit. This is done to efficiently without significant delays. approval. A zoning permit or zoning ensure that the intended building will But efficiency is not all that is impor- clearance signifies that the land use for be located in the appropriate zone tant. Around the world, good zoning the planned development is consistent (industrial, commercial or residential) systems also need to be broadly with the zoning regulations. In Canada according to the city’s zoning require- inclusive, incorporating all groups in the building code requires a builder to ments.