Property rites (Thomas Sowell)

townhall.com ^ | December 29, 2004 | Thomas Sowell

[The Great Yazoo]

When I was house-hunting, one of the things that struck me about the house that I eventually settled on was the fact that there were no curtains or shades on the bathroom window in the back. The reason was that there was no one living on the steep hillside in back, which was covered with trees.

Since I don't own that hillside, someday someone may decide to build houses there, which means that the bathroom would then require curtains or shades and our back porch would no longer be as private. Fortunately for me, local restrictive laws currently prevent houses from being built on that hillside.

Also fortunately for me, my continued criticisms of such laws in this column have not made a dent in the local authorities.

But suppose that someday either the courts will strike down land use restrictions or local officials will respect property rights. Maybe I will be long gone by then and the new owner of this house will be angry at the diminished privacy -- and consequently the diminished value of the house, caused by the building of houses on the hillside.

Would that anger be justified?

The fundamental question is: What did the homeowner buy? And would a change in laws deprive him of what he paid for?

Since the house and the wooded hillside are separate properties, the homeowner never paid for a hillside wooded in perpetuity.

If whoever owns the hillside finds that his property is worth more with houses on it, what right does the adjacent homeowner have to deprive the other owner of the benefits of building on that hillside or selling it to a builder?

True, my house was worth more because of the privacy provided by the wooded hillside. But there was no guarantee that the hill would remain wooded forever. Whoever buys the house buys its current privacy and the chance -- not a certainty -- that the hill will remain wooded.

If a homeowner wanted a guarantee that the hill would remain as is, he could have bought the hill. That way he would be paying for what he wanted, rather than expecting the government to deprive someone else for his benefit.

Many restrictive land use laws in effect turn a chance that someone paid for into a guarantee that they did not pay for, such as a guarantee that a given community would retain its existing character.

In the normal course of events, things change. Land that is not nearly as valuable as farmland as it would be for housing would be sold to people who would build housing. But restrictive laws prevent this from happening.

Such laws help preserve the existing character of the community, at the expense of farmers and others who would gladly sell their land to builders if they had a chance to do so. Because they can't, their value of their land is reduced drastically.

The biggest losers are those families who are deprived of housing and those families who are deprived of the standard of living they could have if they did not have to pay for sky-high rents or home prices due to an artificial scarcity of housing.

The biggest winners are existing homeowners, who see the value of their property go up by leaps and bounds. Also benefitting are environmentalist groups who are able to buy up farmland at a fraction of its value because there are so few alternatives for the farmers.

One of the rationales for such land use restrictions is the "preservation" of agricultural land. But nothing is easier than to dream up a rationale to put a fig leaf on naked self-interest. Far from being in danger of losing our food supply, we have had chronic agricultural surpluses for more than half a century.

Another rationale for laws restricting land use is that "open space" is a good thing, that it prevents "overcrowding" for example. But preventing people from building homes in one place only makes the crowding greater in other places. This is just another fig leaf for the self-interest of those who want other people to be forced to live somewhere else.

Whatever their rhetoric or rationales, environmentalists have no more rights under the Constitution than anyone else -- at least not until liberal judges began "interpreting" property rights away.

©2004 Creators Syndicate, Inc.

[Capriole]

Or maybe we could all have our own way--the preservationists could see open land preserved, and homeowners chagrined by overcrowding would not have to seek new developments--if we would just STOP ALL THIS IMMIGRATION!

[henderson field]

This could not have been said better. Each immigrant uses up 5 acres of land. Where is the Sierra Club on this issue? Counting its money.

[KC_for_Freedom]

In his book "Natural Process", freeper Carry_Okie proposed land owners pay a "view fee" to the owner of the property they like viewing. This way the property owner of the hillside has some incentive to leave the property undeveloped. T. Sowell, take note.

[apackof2]

Interesting thought, much easier than selling, packing up and relocating

[Sloth]

If a homeowner wanted a guarantee that the hill would remain as is, he could have bought the hill. That way he would be paying for what he wanted, rather than expecting the government to deprive someone else for his benefit.

What a novel concept.

[Phantom Lord]

On topic but slightly different. Here in Raleigh NC and surrounding areas (and all across the country) there are people (both elected and not) who are pushing "smart growth" and "green space" concepts. There is a local developer who has been trying to develop a sizable area of land that HE OWNS into a high rise residential and commercial mixed use area. There is a well organized group of residents who live near by that have been fighting it for a long time on the basis of green space and that the development will cause traffic increases and problems for their neighborhood.

One of the leaders of the citizens groups called into a local talk show that was discussing the situation. After several minutes of her rantings the host simply asked her the following question...

"All I am hearing from you is that you want government to do this and you want government to do that. Why don't you and your fellow neighborhood residents pool your resources and purchase the land so you can maintain it as the green space you desire?" The lady's response was "I can't believe you would ask such a thing" and then she promptly hung up.

It is so much easier for people to whine and complain and demand that government do something with someone elses money to meet a want that people like her have than for her and her neighbors to do for themselves.

[Carry_Okie]

I tried to get Sowell to read the thing, but since I'm not famous and don't have a PhD he wasn't interested. IMHO, while he understands that property rights are important and recognizes the consequences of regulatory government, his understanding of the role of corruption in regulatory government and how property rights and free markets can slowly eliminate the need for regulation is superficial, at best.

[Tax-chick]

Great idea!

[The Spirit Of Allegiance]

Each immigrant uses up 5 acres of land.

Not just that, while every immigrant is an intelligent, sensitive beast, it takes 5 million gallons of water to raise one to the point where they are ready for market; each immigrant passes 50,000 cubic feet of methane into the environment every year, contributing to deadly global warming and destroying our ozone layer. ...Wait. That's cattle. Never mind.

[KC_for_Freedom]

I am surprised, your book was thoughtful and logical and I would think someone would have recommended that Sowell read it, (even it he did not want to take the author's word that he should.) I, like you am not famous, but good ideas tend to get around. I bet eventually it makes it to his desk.

[The Great Yazoo]

We have a greenspace fund here in Naples, Florida, comprised of tax money to purchase land to leave vacant. It hasn't been around long enough to assess how it will work.

I voted against it because I predict the program will ultimately result in:

favored landowners dumping undesirable property on the county for prices in excess of those any private purchaser would pay;

favored landowners will have their property values increased because neighboring properties are purchased by the fund; and

urban sprawl of development more broadly across the county.

While the greenspace tax seems a good idea, I'm not sure it is good policy in reality. We'll see.

[mtbopfuyn]

Kick the immigrants illegals out and buy the hill --- Standing ovation.

[alessandrofiaschi]

PING ---> "SOWELL PING"

[Alamo-Girl]

Thanks for the ping!

[alessandrofiaschi]

SURELY, THIS ONE IS AN ARTICLE TO SHARE WITH OUR FRIENDS.

[shubi]

You don't want a radical organization like Greenpeace owning any land. Your safety will be in jeopardy, so will your property.

[superskunk]

Thanks for the ping. Good article.

[Carry_Okie]

I bet eventually it makes it to his desk.

One can only hope.

[headsonpikes]

Every time what would otherwise be a private human action is politicized, as is land use via zoning and environmental laws, we are one step closer to a socialist American nirvana.

Or to a totalitarian hell - take your pick!

A Pascal's Wager for our time. ;^)

[Phantom Lord]

Zoning and environmental laws regarding development and land use are clearly needed and a justified function of government. The problem is they have gotten way beyond their rightful scope.

[Phantom Lord]

Greenspace, not Greenpeace.

[shubi]

OH!! Sorry...

[Phantom Lord]

I'd like the rights to republish this book. How might I do that?

A very large check.

[Carry_Okie]

I'd like the rights to republish this book. How might I do that?

You can write him directly c/o The Hoover Institution, Stanford University, Stanford, CA 94305-6010, or use their contact page.

[Carry_Okie]

Sowell demonstrated that zoning laws serves to protect homeowner interests at the expense of renters, who must pay higher rents as a result of the artificial supply shortage). (See Markets and Minorities.)

It's far more than zoning laws, but regulatory power in general, often for corrupt purposes. If you want to see a real-time, inflation adjusted, opportunity cost based analysis of the conversion of timberland to housing AND read a proposal for free market means to replace the need for regulatory government, you might want to examine my book.

[Phantom Lord]

When I say zoning regs and enviro laws are justified and a proper function of government I firmly believe I am correct. Should a town not have the ability to zone an area 'residential' and thus prevent a fireworks company from purchasing several lots and building a manufacturing and distribution facility? How is that not a proper function and jurisdiction of government?

[headsonpikes]

Landowners can voluntarily, for their own interest, add restrictive covenants to their deeds governing exactly those issues which might conflict with quiet enjoyment.

It is the politicization that is the problem.

The government should stick to their own armed and dangerous knitting, as spelled out in the Constitution.

[Carry_Okie]

When I say zoning regs and enviro laws are justified and a proper function of government I firmly believe I am correct.

We disagree. Regulatory power destroys the intangible value of those goods for which we use that power to preserve. That fact disinvests the wealth necessary to care for those goods. It is sufficient power to be used for corrupt purposes that are very hard to detect and prosecute.

Should a town not have the ability to zone an area 'residential' and thus prevent a fireworks company from purchasing several lots and building a manufacturing and distribution facility? How is that not a proper function and jurisdiction of government?

The residents can enter into a contract precluding such instead.

[Carry_Okie]

Residents who do not own property don't get to do what you suggest - the landlord does.

Forgive my imprecision; I was thinking landowners.

As a renter, I strongly opposed these sidewalks - more work for me (shoveling snow) with no benefit to me.

If the landowners wanted to build the sidewalks with their own funds, what claim would you have to control the use of their property? Do you think the renters should compensate the owners if they could not realize a return on investment?

If, on the other hand, the sidewalk is to be built with public money, complain all you want as your rent pays the property taxes even if the check comes from the landowner.

There are several things wrong in this picture as you can see, the existence of property taxes being the most significant. Trying to fix a broken system with more political patches inevitably leads to unintended consequences.

[Phantom Lord]

If you go back to my original post on the matter I clearly ended it by stating that the current use and scope of government action in this areas has grown far beyond is proper scope.

[The Great Yazoo]

I remember similar analysis being discussed more than 20 years ago when I was in law school. The problem with the proposal is not theoretical, but practical.

There's no technical impediment preventing one landowner from obtaining the voluntary agreement of a second landowner not to interfere with the first landowner's view. For example, one landowner could agree not to "improve" the hill, not to harvest the trees on the hill, and not to build anything on the hill, but to maintain the hill forever in its then-current condition, all so as not to interfere with another landowner's view. Generally speaking, restrictive covenants burdening certain lands for the benefit of other lands are really quite common.

There are practical problems with your proposal, however.

Assuming a permanent restriction, at what price (less than the fair market value of the hill property) would the hill owner (the property being viewed) (the "Viewee") charge the hillside homeowner (the owner viewing the hillside) (the "Viewer") permanently to restrict use of the property to be viewed? If the Viewee's land can't be used because of the restrictive covenant, the Viewee's land is no longer an asset but has become a liability (the Viewee must continue to pay taxes on the land). Consequently, the Viewee has no incentive to agree to the restrictive covenant unless the Viewee is paid the land's full fair market value.

That raises a question on the other side of the equation. If the purchase price for the restrictive covenant is same as the purchase price for the land (the land's fair market value), why would the Viewer buy only a restrictive covenant and not the full fee simple absolute (full ownership of the property)?

Then there's the problem of free riders. Why would Viewer buy the restrictive covenant which is enjoyed not just by Viewer, but also by all of Viewer's near neighbors? Viewer's near neighbors benefit from the restrictive covenant Viewer paid for, but pay nothing for it. Again, the Viewer would buy the fee simple absolute for the fair market value, but would have no incentive to buy a mere restrictive covenant at that same price.

One approach would be to have government buy the restrictive covenant. But why would taxpayers across town be expected to pay for a restrictive covenant from which they receive no benefit?

If a single developer developed lands in a neighborhood, that developer could limit use of a portion of the development by restricting use of specified lands ("Common Areas"). Other lands ("Lots") would benefit from the restrictions imposed against the Common Areas. The developer would then sell the Lots, charging a premium for the Lots especially benefiting from the restrictions (in California, it may be a hillside lot; in Florida, lots adjacent to a "water feature"). Lots not especially benefited from the Common Areas would not command a premium price. What I've described in this paragraph is, in fact, the principal way restrictive covenants are used.

The proposal may work if the "view fee" is only temporary. For example, Viewee would agree not to develop Viewee's lands for (say) five years, at the end of which time Viewee would be free to develop the lands.

Viewee would have an incentive to sell viewing rights when Viewee has no present plans to develop (Viewee gets something, rather than nothing, for his vacant property). When the land is to be left vacant anyway is precisely the time, however, that the Viewer has the least incentive to pay the view fee.

Viewee would have no incentive to sell viewing rights when Viewee is planning to sell the land or develop it, however. But that is precisely the time Viewer would most be interested in paying a view fee to acquire viewing rights.

In any event, there is nothing that would prevent landowners from entering into such voluntary arrangements. Obviously, the agreements would need to be adequately documented and would have to be done in such a way as to give third-party purchasers of property adequate notice of the agreements if the Viewer wishes to bind the land.

[Luis Gonzalez]

"If a homeowner gun owner wanted a guarantee that the hill would remain as is to keep his gun in the car, and park his car on the parking lot adjacent to his place of work, he could have bought the hill parking lot. That way he would be paying for what he wanted, rather than expecting the government to deprive someone else for his benefit."

[Kay Ludlow]

In my mother's neighborhood, back in the 70's, the guy who owned the land behind her street worked up a plan to develop it - essentially adding a new street where she and her neighbors would have houses in back of theirs. The people on the street weren't real happy about it, and talked with the landowner, who encouraged them to buy the lot behind them. Almost all of them did - the value was still low as there was no access. Once almost all the lots that would have been the lower side of the new street sold at low prices, it no longer made economic sense to him to pay the development costs (streets, water, lights, power, etc) for one side of the street. To date, he has still hasn't developed that part of his land. Individual citizens getting together and spending their own money to get what they want - sweet, isn't it?

[Carry_Okie]

I remember similar analysis being discussed more than 20 years ago when I was in law school.

That explains a lot. As it is, lawyers are the source of the problems with regulatory government, making oodles of bucks selling protection rackets through NGOs. Lawyers get brainwashed too, in fact, they are screened for their predisposition to Statist solutions via the LSAT.

There are practical problems with your proposal, however.

Let's see if you understand "my proposal"...

Assuming a permanent restriction,

...and the first thing you do is set up an un-necessarily restrictive case. You are correct that covenants are exchanged all the time, but that they do not respect changes in valuation. I don't recommend such, but advocate term contracts for services.

As for price, you are forgetting all the other uses of property coincident with selling a viewing contract: habitat, hunting, fuel and watershed management... every one of which is currently the exclusive province of regulatory government. Products, services, responsibilities, and risks that have effectively been socialized by regulatory government.

If the Viewee's land can't be used because of the restrictive covenant, the Viewee's land is no longer an asset but has become a liability (the Viewee must continue to pay taxes on the land).

See above. Further, as I have said elsewhere on this thread, property taxes are, IMO, unconstitutional and have no place in the equation. However, even allowing them from the public good perspective, it beats an open space district or an easement, the "practical problems" of which are legion because they too often involve corruption on behalf of developers.

That raises a question on the other side of the equation. If the purchase price for the restrictive covenant is same as the purchase price for the land (the land's fair market value), why would the Viewer buy only a restrictive covenant and not the full fee simple absolute (full ownership of the property)?

Here again, you are only seeing but two uses: develop or not. You say you understand my proposals, but clearly do not. Need an example?

Who would go into the park business competing against an entity that gets all its assets for free, pays nothing in insurance, can get away with a product in lousy condition, and charges virtually nothing to use it? The very existence of an armed government monopoly in the land entertainment business precludes valuable non-development uses of private property.

Maybe you should understand more about "my proposal" before you criticize it, constructively or otherwise.

Then there's the problem of free riders. Why would Viewer buy the restrictive covenant which is enjoyed not just by Viewer, but also by all of Viewer's near neighbors?

As seller, I only care about whether I get my price for my view. If I do a good job of marketing, then I enlist the wishes of as many potential customers possible to maximize total value. As a buyer, I get to stipulate how that view is managed, who gets to use the place as a park, who gets emergency food or shelter from the provider, etc. As to whether others who derive benefit from the view pay or not, it beats using government to devalue my land by force if people like looking at it. It beats NGOs using government to "protect" something on my property in order to put me out of business for quick sale to a preferred buyer. Once my neighbors were confronted with the choice of raising the cash or watching me do something ugly with it, it's amazing how fast people start to cooperate. I can always put up a fence or plant trees near their property line.

One approach would be to have government buy the restrictive covenant.

As I inferred, a typical statist "solution," incapable of overlaying the kind of dynamic complexity of which I speak.

But why would taxpayers across town be expected to pay for a restrictive covenant from which they receive no benefit?

It's called an Open Space District, and yes, cleaning ladies from across town who never see one much less go hiking, pay for the benefit of developers who build adjacent to an OSD parcel and get to market free park access to their wealthy customers for the price of a contribution. It's ugly, but it's very profitable.

What I've described in this paragraph (your Florida California example) is, in fact, the principal way restrictive covenants are used.

Such is an extremely crude system.

Viewee would have no incentive to sell viewing rights when Viewee is planning to sell the land or develop it, however.

To build or not to build, that is not the question. A seller's decision depends upon a whole array of products that don't exist (viewing being but one) and the best combination of each unique to each place (one of the benefits of markets is that they are capable of such complexity).

Lest you think the legal overhead for such a market too high, I give you automated contracting software. Lest you think trading in risk offsets too complex, I give you hedging software. Lest you think organizing a set of owners managing stopovers in an international migratory flyway business, I give you the Internet.

Obviously, the agreements would need to be adequately documented and would have to be done in such a way as to give third-party purchasers of property adequate notice of the agreements if the Viewer wishes to bind the land.

People selling products advertise to maximize their return and find out what customers want. Government cuts special deals in secret in return for favors from the politically dominant, particularly buying bond debt.

[lodwick]

This is the UN's Agenda 21 - google it and fight it.

[aragorn]

Luis,

After several days of introspection and reflection (not necessarily of your arguments, but) of your bottom line, and of what *I* believe, I find that integrity forces me to post this publicly (since my other arguments have been posted thusly):

You are correct. I have no rights on your property.

Therefor, I must also conclude that the Oklahoma law we have been sparring about is indeed a misguided piece of legislation.

FRegards,

aragorn

[Carry_Okie]

This is the UN's Agenda 21 - google it and fight it.

Or read the book :)

Last I googled Agenda21 it gave me 193,000 hits.

[farmfriend]

Rights, farms, environment ping.
Let me know if you wish to be added or removed from this list.
I don't get offended if you want to be removed.

[KC_for_Freedom]

Viewee would have no incentive to sell viewing rights when Viewee is planning to sell the land or develop it, however. But that is precisely the time Viewer would most be interested in paying a view fee to acquire viewing rights.

As I see Carry_Okie has already replied, I will just say that the premise, (without going into all the details spelled out in his book) is that players in a property deal include the viewers and potential developers, and regulators (who we are trying to cut out of the mix). The concept may or may not result in no development. The idea is that all the stakeholders can participate directly with the exchange of something of value and the property owner is compensated for his property rather than have the force of government do something that renders his property worth less.

A related idea is that the land owner will want to do what is best for his investment and will take care of the land in a way that is better than government regulation and an attendent breauracucy can do. If development is what is on his mind, then the same capitalist forces will strive in the direction of a development that is in the best interest of the stakeholders, taking into account view and neighbors interest in a better way than council meetings and planning commissions can.

[hedgetrimmer]

Bump for later.

[E.G.C.]

BTTT!!!!!!