Conventional zoning and overlay zoning influence the development and the spatial structure of urban environments. This research tests the externality effects of privately and publicly induced rezoning on residential real estate prices at five different distances. Privately induced rezoning, which maintains homogeneous residential neighborhoods, is observed to increase surrounding residential real estate prices. The shift to nonresidential real estate zones from residential real estate zones is associated with negative price shocks for residential real estate. Urban planners can use these results to make more informed decisions as private developers seek to redevelop underutilized urban property within their district. The spillover effects of publicly induced rezoning such as Tax Allocation Districts or Tax Increment Financing districts are found to be inversely related to distance. Residential real estate located within 1.25 miles from a publicly rezoned district experience positive price externality spillovers. Yet, this positive effect disappears with greater distance. Municipal officials may use these results as they craft legislation to revitalize districts with overlay zoning.
