Property rites (Thomas Sowell)

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.

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.

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.

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.

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.

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