Many communities on the urban fringe are implementing a range of policies to preserve farmlandand open space, cluster residential development, and guide development to areas with existinginfrastructure. These efforts are an attempt to control overall growth and the concomitant loss in openspace and also to counter a trend toward the so-called large lot development that often takes place in theseareas. Planners have argued that policies to manage density are the most important local policy focus forurban areas in the coming years.It is possible that large lot development and sprawl are themselves the result of governmentpolicy. Most local governments use zoning to establish minimum acreage requirements for eachresidential dwelling unit; in ex-urban localities, these limits are often quite high. Developers might build asubdivision with average lot sizes greater than the minimum but they cannot by law go below it. Someresearchers have argued, however, that the spatial patterns of development are simply the natural result ofhousehold preferences and market forces.In this paper, we address the question of whether zoning limits are the primary cause of lowdensity,sprawling development or whether market forces tend to dictate this outcome. If zoning limitsaccount for low-density development in at least some cases, how would development patterns be differentif there had been no such rules? We begin by constructing a simple model of the developer decision aboutthe density of new development. The subdivision is the unit of observation, and developers must weighboth demand and cost considerations in choosing density, in addition to complying with zoningrestrictions that vary across parcels. We apply the model using parcel-level data from a region wherezoning rules vary but are exogenous to the period under study. Calvert County, Maryland, nearWashington, DC, is an historically rural county that has experienced rapid growth in recent years. Thecounty has a transferable development rights (TDRs) program that has led to a great deal of variability inthe intensity of development across properties. We are able to not only examine the extent to whichzoning has contributed to large lot development but also to determine the economic forces that underliedensity decisions. Finally, we are able to forecast how density would have been different in the absence ofzoning rules by estimating a Tobit equation that is censored for the observations constrained by zoning.