Land in the United States is not simply owned and then developed. What can be built on a parcel is set by a local code that predates the current owner.
Zoning is written locally
Zoning authority generally rests with cities and counties rather than states or the federal government, so the rules change at municipal boundaries.
Each jurisdiction adopts a map dividing land into districts and a text describing what is permitted in each, from residential categories to commercial and industrial ones.
Two parcels facing each other across a street can therefore carry entirely different development rights, which is visible in the built form of most American cities.
Use restrictions come first
The first question a code answers is what activity is allowed. A district may permit detached houses only, or apartments, or retail, or some combination.
Where a large share of a city's residential land permits only single-family construction, the supply of other housing types is limited by law rather than by demand.
This is why debates about American housing costs so often turn into debates about local ordinances rather than about builders or materials.
Dimensional rules constrain the rest
Beyond use, codes set minimum lot sizes, setbacks from property lines, maximum height, and limits on how much of a lot may be covered by structure.
These interact. A parcel may permit apartments in principle while its setback and height limits make a building of viable size impossible to fit.
Parking requirements work similarly, consuming land and cost per unit in ways that can determine whether a project is feasible at all.
Variances and rezoning are discretionary
Where a project does not comply, an owner can seek a variance or ask that the parcel be rezoned, both of which involve public hearings and local decision-makers.
Because the process is discretionary and public, outcomes depend on local politics, and the time it consumes is itself a cost carried by the developer.
That uncertainty is priced into land, which is why parcels with clear as-of-right development potential trade differently from those requiring approvals.
Nonconforming uses freeze the past
When a code changes, existing buildings that no longer comply are usually allowed to remain but not to expand, and sometimes not to be rebuilt if destroyed.
This preserves older buildings that could not legally be constructed today, which is why many beloved neighborhoods could not be reproduced under current rules.
For a buyer, the practical implication is that a property's current use is not proof of what a new owner would be permitted to do with it.