Store Size Caps

Dozens of communities, recognizing that their local economies can absorb only so much new retail without causing numerous existing businesses to close, have enacted zoning rules that prohibit stores over a certain size. Store size caps help to sustain the vitality of small-scale, pedestrian-oriented business districts, which in turn nurture local business development. Store size caps prevent the many negative impacts of big-box development, such as increased traffic congestion and over-burdened public infrastructure, and they protect the character of the community by ensuring that new development is at a scale in keeping with existing buildings.

Size caps do not single out particular companies and prevent them from doing business. Instead they require all retailers to build stores that are appropriately sized for the community.  Wal-Mart, Home Depot, and other chains are free to open stores so long as those outlets do not exceed the size limit—a limit that local businesses are also subject to. Cities that have adopted size caps find that, in some cases, retailers that typically build larger stores will opt not to open and, in other cases, they will design a smaller store that fits within the cap.

Key Decisions in Drafting a Size Cap

For more detailed guidance on these and other key questions to consider in drafting a cap, see our Store Size Cap Policy Kit, which includes a model ordinance, tips and advice for drafting an ordinance, supporting research, and other materials.

•    What should be the size limit?

What constitutes an appropriate upper limit for the size of retail stores depends on many factors, including the size of the town, the scale of its existing buildings, and its long-term goals with regard to retail development. Some communities have banned only the biggest stores, while others have chosen much smaller limits.  A cap of 50,000 square feet is about average.  (For a visual illustration of various store sizes, see How Big Are Big Box Stores?)

•    What will be the geographic extent of the cap?

Like all zoning laws, size caps can apply to the entire city or just a particular neighborhood. San Francisco, for example, bars new stores larger than 4,000 square feet from locating in certain neighborhoods, and sets a larger cap in others.  If the cap applies only to particular areas of town or if the size allowed varies by zone, a reasonable justification for the distinctions should be articulated in the policy.

Some counties have adopted store size caps to keep big box retailers from building in unincorporated areas beyond city boundaries. States could adopt statewide size limits, though, so far, only Vermont has considered such a measure.  Outside of the United State, where land use policy is typically set at the national, rather than local, level, some countries, including Ireland and Norway, have adopted nationwide store size caps.

•    How should a single retail establishment be defined?

In Calvert County, Maryland, Wal-Mart tried to get around a size cap by proposing to build two adjacent stores. Most size cap ordinances are not vulnerable to this because they define two or more adjacent buildings operated by one company as a single retail store for the purposes of the cap (meaning the total square footage of all the grouped buildings cannot exceed the cap).

The Legality of Size Caps

Cities and towns have long had the authority—through the zoning powers granted to them by state law—to control the scale of development.  Most municipal zoning codes are filled with provisions that regulate scale by, for example, restricting the height of buildings or setting a minimum acreage for house lots.

Store size caps are merely a variation on this long-standing use of zoning to ensure that new development is of a scale appropriate to the community.  As such, they are perfectly legal.  Indeed, scores of cities and towns have restricted the size of stores and their laws have not been challenged.

The only cities that have faced challenges are those with size cap ordinances that apply only to certain types of retailers or in certain circumstances.

Wal-Mart tried to overturn a Turlock, CA, law that prohibits stores over 100,000 square feet that devote more than 5 percent of their space to groceries.  While Wal-Mart and Target supercenters are affected by the policy, other kinds of large stores that do not carry food are not.  Wal-Mart argued the ordinance was discriminatory and illegally interfered with competition.  But both state and federal courts upheld Turlock’s ordinance, ruling that the restrictions are constitutional, do not unduly harm competition, and are a valid use of municipal zoning authority.

Another case involved an ordinance in Frankenmuth, MI, that bars stores over 65,000 square feet but applies to only one area of town.  An affected property owner whose land had been optioned by Wal-Mart filed suit against the town, arguing that the law violates several provisions in the US Constitution, including equal protection, due process, and the dormant commerce clause.  In a March 2009 decision, a federal court dismissed the due process and commerce clause claims, but ruled that the equal protection claim should proceed to a full trial.  The judge said that the town’s stated justifications for the size cap were legitimate, but that those justifications supported a citywide cap and did not seem to provide a rational basis for excluding some areas from the limit.

Supercenter Ordinances

Several cities in California and Arizona have adopted “supercenter” ordinances like the one in Turlock described above.  Unlike broader store size cap ordinances, which limit the size of all types of retail stores, these measures cap only those stores that devote a percentage of their floor space or inventory to groceries, such as Target and Wal-Mart supercenters. These laws do not affect stores that do not carry food and, in many cases, also exclude warehouse stores that sell food in bulk, such as Costco.

Below, we have included one example of a supercenter ordinance, this one from Turlock, California.  Follow the Turlock link to see a list of other cities that have adopted similar policies.

Although supercenters do have some unique impacts that distinguish them from other large-format retail stores, the New Rules Project favors setting an across-the-board limit that applies to all retail stores. From a policy standpoint, all large-scale retailers have significant impacts on the local economy, the vitality of neighborhood and downtown business districts, the environment, and community life.  From a political standpoint, land use regulations that set consistent limits on the scale of retail development are likely to garner much broader support and are not vulnerable to arguments that they unfairly target particular companies.

More Information:

• Store Size Cap Policy Kit
  Includes a model ordinance, tips and advice for drafting an ordinance, supporting research, and other materials.

• How Big is Too Big?
  Two-page fact sheet on the effects of large stores and store size cap ordinances.

• How Big Are Big Box Stores?
  A visual illustration of different store sizes, ranging from Main Street retailers to supercenters.

• Impact of Big-Box Stores
  Key studies and fact sheets

• Protecting Locally Owned Retail: Planning Tools for Curbing Chains and Nurturing Homegrown Businesses
  by Stacy Mitchell, Main Street News, February 2004.

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