Zoning laws and property rights

A couple of weeks ago, I sat down and read Matt Yglesias’ The Rent Is Too Damned High and Ryan Avent’s The Gated City back to back. Both were a pleasure to read, for their content, and for the opportunity to kick a couple of bucks to two of my fave bloggers behind an ennobling veil of commerce. As an avid reader of both authors’ online work, there were no huge surprises, but reading the ebooks took me deeper and inspired some more considered thought on their ideas. Ryan Avent and Matt Yglesias (and Ed Glaeser too!) are separate humans with their own identities and ideas. But these “econourbanists” share a core view, and I hope they will forgive me if I consider their work together. Although they arrive at a similar place, the two books take very different roads: Avent’s book is a bit wonkier and more economistic, focusing on the macro role of cities in enhancing productivity through economies of scale and agglomeration; Yglesias treats the same set of issues more polemically and with an emphasis on the personal, thinking about how individuals should expect to make a living in an increasingly service-oriented economy, the importance of accessible cities to the kind of prosperity he envisions, and the perils of any obstacle that makes urban life inaccessible (“the rent is too damned high!”). Read both!

In a nutshell, the econourbanists’ case is pretty simple: Cities are really important, as engines of the broad economy via industrial clustering, as enablers of efficiency-enhancing specialization and trade, as sources of customers to whom each of us might sell services. Contrary to many predictions, technological change seems to be making human density more rather than less important to prosperity in the developed world. Commerce intermediated at a distance via material goods has become the province of cheap workers in distant lands, and will very soon be delegated to robots. The value of human work is increasingly in collaborative information production and direct personal services, all of which benefit from the proximity of diverse multitudes. Unfortunately, in the United States at least, actual patterns of demographic change have involved people moving away from high density, high productivity cities and towards the suburbanized sunbelt, where the weather is nice and the housing is cheap. This “moving to stagnation”, in Avent’s memorable phrase, constitutes a macroeconomic problem whose microeconomic cause can be found in regulatory barriers that keep dense and productive cities prohibitively expensive for most people to live in. It is not that people are “voting with their feet” because they dislike New York living. If people didn’t want to live in New York, housing would be cheap there. It isn’t cheap. Housing costs are stratospheric, despite the chilly winters. People are voting with their pocketbooks when they flee to the sun. (“The rent is too damned high!”) Exurban refugees would rush back, and our general prosperity would increase, if the clear demand for high-density urban living could be met with an inexpensive supply of housing and transportation. The technology to provide inexpensive, high quality urban housing is readily available. If “the market” were not frustrated by regulatory barriers and “NIMBY” politics, profit-seeking housing developers would build to sell into expensive markets, and this problem would solve itself.

Before going on, I should confess that I am not neutral. I was on-board with the econourbanists’ project before I’d read a word they’d written. I have always loved cities, and the problem at the center of Yglesias’ book has been a pressing problem in my own life. (I enjoy very dense and cosmopolitan cities, but am too risk averse to accept the steady burden of a high rent given the uncertain and irregular clumps by which I’ve earned my living.) Ultimately, I think that Avent and Yglesias and Glaeser have the right vision of the world that we need to move towards.

I’m skeptical, however, of the path that they’ve outlined to get us there. The econourbanists’ deregulatory ideas might win some victories at the margin, and might lead to important and useful reforms of regulatory “best practices”, for example regarding parking. But as a political matter, I don’t think it will be possible to diminish neighborly veto power over new development enough to put a dent in housing undersupply. As a matter of fairness, I think they underestimate the degree to which what they are after amounts to a “taking” from incumbent homeowners, not all of whom are unsympathetic rich bastards. And even if they could “win”, though it is clear that untrammeled developers would deliver housing supply, I don’t think they’ve made the case that a deregulated market would deliver high quality density. The econourbanists make a good case that density may be necessary to their vision of prosperity, but density is obviously not sufficient. The world has its Manhattans and San Franciscos, but it also has plenty of dense slums in poor cities. I’d like to see more attention to the circumstances that actually conjured the places we now recognize as dense, prosperous, and desirable. Was it the sort of libertarianism they prescribe?

One should always be careful of claims that problems could be solved if only we “let the market do its work”. I don’t mean to go all PoMo, but to the degree that there exists an institution we might refer to as “the market”, it is doing its work and it is not doing the work Ygesias and Avent ask of it. There is the market as it is, and then there is an infinite range of markets that might exist if the institutional arrangements and property rights that govern market transactions were different. Given the political obeisance still compelled in the United States by “market outcomes”, it is a common trick to claim that outcomes one would prefer are the outcomes that would occur if only institutions and property rights were redefined “appropriately”. That may be useful rhetorically, but it is always a bit disingenuous. In reality, what Yglesias and Avent propose is a redefinition of the rights surrounding urban property. If you redefine the institution of property, you reshape market outcomes. But persuading people to liberalize zoning restrictions in the name of “free markets” will be hard. Because the reform that Avent and Yglesias want — along with the developers who would love to build in expensive cities, and the people like me who would love to live in expensive cities but can’t afford to — amounts to an expropriation, a confiscation of property rights, from one of the best organized and most politically enfranchised groups in the United States.

A property right is first and foremost a right to exclude uses other than those desired by its owner. My car is mine because you can only do with it what I want, or else you can’t use it at all. When a person purchases “real estate”, they are buying a bundle of rights to exclude. You cannot trespass on my land without my permission, you can not be sheltered by my roof without my permission. But dirt and roofs are commodity items. If exclusive use of some dirt and a roof are all I am after, then, well, they are cheap in the sunbelt. If I purchase a home in an expensive city, in a “nice, stable neighborhood with good schools”, I’m paying for a lot more than dirt. Yes, I am paying for proximity to my prosperous city’s opportunities and amenities, but that is not all. I am also paying for the fact that not only my home, but my neighbor’s home, is being put to a use that pleases me and to which I would consent. I am paying for the fact that my neighbors themselves are the kind of people I would be pleased to live next door to. I’m paying for the fact that, as parents, the people whom I am moving in with send well-raised children to the local public school and devote some fraction of their attention to the management of that school. I’m paying for the fact that the streets, the architecture, the trees and public parks, are arranged in a way that pleases me. These are all reasons why, if I had the kind of money I do not have, I might pay up to live in a “nice neighborhood” located near the heart of a thriving city.

You might say this is idiotic. Narrowly, my deed to a certain property doesn’t entitle me to exclude bad parents from moving in next door or to prevent a high rise from replacing charming brownstones across my street. If the weather is nice on the day I purchase my home, does that grant me a legal right to perpetual sunshine?

But property rights arise in practice before they are written on paper. Even if they are never codified, the law, whether through courts or through legislatures, is loathe to disturb customary rights (unless the holders of evolved property belong to politically marginal classes). When people spend small fortunes on a “charming brownstone”, they do so with the understanding that the neighborhood is in fact “stable”. At some level, these affluent, educated buyers know that with their deed to the property comes an ability to exclude alternative uses of the neighborhood. That is part of what they are purchasing, a substantial part of the value for which they are laying out hundreds of thousands of dollars.

The mechanism by which that right is enforced is the thicket of zoning laws and permitting requirements that allow activist property owners exclude uses of the neighborhood to which they do not consent. It is this mechanism that invites the framing adopted by Avent, Yglesias, and Glaeser. Since the right to exclude is enforced by the operation of regulatory bureaucracies rather than by the criminal law of theft and trespass, we can claim that it is “government” that is enforcing policies whose outcomes we dislike in opposition to the “rights” of individual sellers, potential new residents, and property developers, to do as they please. But in substance, the enforcement mechanism is secondary. Purchasers of properties in “nice, stable” neighborhoods paid up for a right to exclude uses of their neighbors’ property to which they would not consent, and potential sellers who might enjoy a windfall if they could sell out to a high-rise developer understood when they purchased their properties that neighbors would likely prevent them from exploiting this sort of opportunity. Ex ante, most property owners are glad to cede the right to sell to a developer in exchange for the right to prevent their neighbors from doing the same. Retaining that right would create a prisoner’s dilemma whereby the threat of a neighbor’s defection (she sells to a developer at an attractive price for a use that impairs my property’s value) would leave each owner in a poor bargaining position, and guarantee that the character of the neighborhood could not be preserved. The value of neighborhood properties could not be justified or sustained without protection from this dynamic.

The private-property-like quality of zoning law is evident in the fact that where municipal regulations don’t enforce the right to exclude alternative uses of a neighborhood, property owners invent contractual means of doing the same. Developers, whether of high-rise condominiums or sprawled out “golf communities”, cobble together with a mix of contract and corporation law obligatory “community associations” that control and restrict the use of privately-owned properties (along with managing common spaces and other purposes). Developers don’t abridge the rights of their customers out of some inexplicable, cruel perversion. They form these associations, and grant them restrictive powers, because customers demand it, because doing so maximizes the market value of the properties they wish to sell. As buyers, developers hate zoning law, but as sellers they promulgate it. It is “the market” that demands some mechanism of overcoming potential coordination problems among neighbors, not the acommercial mix of identity politics, misplaced environmentalism, and “NIMBY”-ism that Yglesias and Avent emphasize. The only reason city neighborhoods don’t have restrictive covenants and powerful community associations is because they have city governments that serve the same function.

The definition of and proper scope of property rights is always contestable. As a matter of sheer interest politics — both my interest in finding an affordable home in a great city, and my interest in a productive and vibrant macroeconomy — I want to be on-board with Avent and Yglesias, and simply argue that the historical ability of urban property owners to exclude undesired development should not be construed as a property right. There are lots of purported property rights that I consider illegitimate and am perfectly willing to contest. For example, I agree enthusiastically with Yglesias that we have overextended rights to exclude on a variety of issues: so-called “intellectual property”, immigration law, and occupational licensing. All of these controversies pit the short-to-medium term interests of organized incumbents against those of unseen and less organized new entrants, and arguably against the long-term interests of the polity as a whole. But I am a bit more hesitant on the zoning question.

If we reform away urban zoning restrictions, are we going to invalidate the restrictive covenants of suburban developments? Affluent urban property owners would have almost certainly evolved institutions that perform the functions of community associations if they were not able to rely upon the good offices of municipal government for the same. If restrictions on higher-density development are illegitimate, then should the state refuse to enforce such restrictions when they are embedded in private contracts? Perhaps the answer is an enthuastic “Yes!” After all, over the last 60 years, the state intervened very nobly to eliminate a “property right” enshrined in restrictive covenants and designed to exclude people of certain races from their neighborhoods. Three-thousand cheers for that! But state refusal to enforce previously legal contracts sounds a lot less like “letting the market work” and a lot more like deliberate government action. It would be short-sighted to reform away municipal residents’ ability to exclude commercial and high-density development while leaving contractual restrictions negotiated between property owners enforceable. That would create a window for some high-density development against the wishes of affluent incumbents, but over time the result would be the privatization of affluent neighborhoods. Property owners would form restrictive community associations and purchase potential development sites as common property. There is already a de facto stratification of tacit property rights within cities. Very affluent communities have nearly automatic veto power over unwanted development while poorer homeowners sometime fight very hard to preserve the status quo. A regime that liberalized zoning restrictions without invalidating contractual restrictions would increase this block-level stratification, and perhaps move us from “gated cities” to a brave new world of gated neighborhoods.

I feel like a sourpuss in all of this, or at best a devil’s advocate. I like Matt Yglesias and Ryan Avent very much. I’m an ardent fan of their work, and I’m likely to be on their side in most actual controversies. I’ll enthusiastically support public or private action that promotes dense urban growth and transit-oriented development. But I think that’s going to require deliberate action, public and private, not just “getting government out of the way” and letting markets work. Dense cities exist to generate economies of scale. But markets cannot be relied upon to discover and exploit economies of scale “on their own”. Capturing economies of scale requires a leap across a chasm, the allocation of resources away from uses that are plainly productive towards uses that seem at first to be less valuable. The eventual benefits start off uncertain and hypothetical, so capturing economies of scale requires that someone bear very large risks of failure. Usually this requires coordination among many actors to divide costs and benefits. The econourbanists’ deregulatory scheme amounts to funding the initial costs of densification with value expropriated from incumbent homeowners, who are asked to cede the status quo pleasantness and exclusivity of their neighborhoods in the service of a hypothetical long-term abundance. That doesn’t strike me as a particularly fair way to finance what I agree is a very worthy project. Given the disproportionate political power of incumbent homeowners, it doesn’t strike me as a tactic very likely to succeed.

Update: I was flipping through The Rent Is Too High this afternoon (3/29), and noticed that Yglesias makes the very same connection that I felt very clever to make in this post, that zoning laws are really a form of property right. Yglesias writes

One way to think about the story I’ve been telling here is as a tale of big government run amok, an out-of-control abridgment of private property rights. A better way to think about it is that over the past several decades, there’s been a revolution in our understanding of what property rights entail. We’ve switched from a system in which owning a piece of real estate means you’re entitled to do what you want with it, to one in which owning a piece of real estate means you get wide-ranging powers to veto activities on your neighbors’ land.

Yglesias supports undoing zoning restrictions despite their property-like character.

He has my apologies for not acknowledging his description of zoning laws as an extension of property. I wrote this post several weeks after reading his book, and have made an unintentional plagiarist of myself by not recalling that he made this point.

Update History:

  • 26-Mar-2012, 1:10 a.m. EDT: “a “nice neighborhood” conveniently located near the heart of a thriving city.”; “cobble together with a mix of contract and corporation law obligatory and perpetual ‘community associations’ “; “Usually that this requires coordination among many actors to divide costs and benefits.”
  • 30-Mar-2012, 1:10 a.m. CDT: Added bold update re Yglesias’ prior characterization of zoning restrictions as property rights.

39 Responses to “Zoning laws and property rights”

  1. david writes:

    If we are advocating state governments being improbably interventionist anyway, it seems simpler to advocate expanding the jurisdictions of social service provision so that the suburban and urban neighborhoods are yoked to the same unitary residual-claimant government.

  2. Mitch Skinner writes:

    It is “the market” that demands some mechanism of overcoming potential coordination problems among neighbors, not the acommercial mix of identity politics, misplaced environmentalism, and “NIMBY”-ism that Yglesias and Avent emphasize.

    Well, it’s all of those things–both “the market” and all that other stuff (or, perhaps, all that other stuff, operating through the market).

    Incumbents’ preferences aren’t some black box that we have to accept uncritically. The state may have banned overt racism, but in a lot of places it’s still there under the surface. Plus, a lot of those incumbents may be genuinely mistaken about what policies serve their own economic interests; they may under-value diversity, for example. Behaviorism opens the door to unpacking and critiquing those incumbent preferences.

    I think you’re right that pure libertarian arguments can be overly simplistic, but I think you need more justification to declare that going against incumbent wishes amounts to a “taking”. And if this “econourbanist” line of argument can change some incumbent minds, or even if it can just provide political cover for adjusting the policy mix, it can have a useful effect.

  3. Bryan Willman writes:

    There is a second faulty subtext to this (in addition the one clearly laid out in the post.)

    That subtext is something like “people are sorted out by these costly mechanisms, which creates various kinds of social-economic-status segregation, if we break down these artificial costs, we’ll break down the sorting and segregation”.

    That’s backwards. Rule number of any elite – YOU (or I) are NOT members, period.

    So the same people who insist on one set of rules or another to create “stable” and “nice” are also the pool of people who will respond to higher density by simply moving away. Or forming combines that own the whole block (see the Dakota in NY)

    Put another way, the relatively less well off who Waldman, Yglesias, et al would like to give better access to the well off consumers of services and movers and shakers, will never be allowed to get too close, by the very people you are trying to move them close to.

    Racism itself seems to have faded a fair amount (though it seems always not far away), but flat out exclusiveness will never go out of style…. People will always find a way to do it…

  4. Many thanks to Matthew. This is one of the biggest tragically underdiscussed issues. One of these days I’m going to do a post on the biggest tragically underdiscussed issues in economics. Also included will be:

    The lack of subsidization for the monumental positive externalities of serious analytical and investigative journalism. See: http://richardhserlin.blogspot.com/2009/10/lets-consider-magnitude-of-costs-of.html.


    Positional/Context/Prestige externalities. See: http://richardhserlin.blogspot.com/2012/02/to-john-cochrane-re-positional.html.

    Selfish local zoning to keep locals housing prices high does monumental harm to society and massively lowers total societal utils, especially over the long run. Thank goodness this is now finally starting to be recognized and taken seriously. See also the work by Glazer and Paul Romer on cities.

  5. Dan Kervick writes:

    This “moving to stagnation”, in Avent’s memorable phrase, constitutes a macroeconomic problem whose microeconomic cause can be found in regulatory barriers that keep dense and productive cities prohibitively expensive for most people to live in. It is not that people are “voting with their feet” because they dislike New York living. If people didn’t want to live in New York, housing would be cheap there. It isn’t cheap.

    Those last three sentences seem to contain a fallacy. The expensiveness of the housing in New York relative to other locations only indicates that the relationship between supply and demand in New York is somewhat different than it is in other locations. It doesn’t by any means show that the majority of people who have fled the city are not motivated by their lifestyle preferences. (My guess is that there are all sorts of age, class and other differences between the leavers and the seekers.) It is also entirely possible that the demand for housing is so high in NYC because a whole lot of people who don’t really want to live in places like NYC are nevertheless compelled to live there due to the demands of their chosen profession. Of course, choosing to pursue one’s career to the detriment of one’s aesthetic, spiritual and moral preferences is itself a kind of preference. But that doesn’t mean it’s a social outcome we should celebrate and forward.

    Anyway, I support policies that enable people to live in the kinds of human habitats they most prefer. For people who want to live in places like New York, by all means, let us help them live there. For the many people who are revolted by the prospect of living in a place like New York, and seek fewer people, more natural spaces, cleaner air, more trees and critters and above all LESS NOISE, let us help them pursue their happiness as well.

  6. JW Mason writes:

    This is a brilliant post — really magnificent — but it feels like it’s missing a third act. If not “the market,” then… ?

    The logical answer is, on the one hand, public provision of density — either in the form of direct public provision of housing, or of density-augmenting infrastructure; and on the other hand, “allowing the market to work” not by deregulating (which won’t work for the reasons you say) but by providing regulations that satisfy peoples need for a recognized right to their neighborhood and its character without the density-stifling side effects of the institutions that do this currently. rent control should be high on the list here, at least in those cities where there are a high proportion of non-young and non-poor renters. In the absence of rent control, it is perfectly rational for renters to object to local development and even, perversely, to any amenities that might increase local housing demand. As with occupational licensing, Yglesias et al. want to just tell the losers from liberalization “tough luck,” but that, as you say, is not a strategy for getting where they want to go. Better to provide a rational set of regulations that protect peoples legitimate desire for stability in their neighborhood (and profession, etc.)

  7. JW Mason writes:

    The general point here — which is really important — is that in society as it exists there are many more or less “legitimate” rights that do not take the form of property rights. When these rights are enforced through institutions notionally designed to manage property, they appear as cumbersome, irrational restrictions on the rights of property. The solution cannot in general be to say that these non-property rights don’t count and that people who surrendered recognized property rights for a claim on them (whether the homeowner who paid a premium to live in a “good” neighborhood, or the union member who accepted a lower current pay in return for the promise of a pension) have to just eat the loss. Not on equity grounds and very much not on political grounds. But on the other hand, *some* non-property rights are not legitimate and should not be recognized. Racial covenants, or Dinesh D’Souza’s right (he has claimed) for his kids to be better educated than those in public schools, since he paid for private education; or e.g. taxi medallions. It’s a delicate and fundamentally political question drawing the line.

  8. Steve, you have much too much concern for the tiny number of existing homeowners (usually well off, or very well off), and much too little concern for 10, 100, 1,000, 10,000+ times as many people they harm, for the country as a whole, for the greater good, for future generations that will live far better with affordable housing in invigorating cities, and much greater wealth and scientific, medical, and technical advancement due to greater and more big cities.

    I know Republicans have successfully promoted selfishness for a generation, so it can sound shocking to talk about sacrificing for the greater good, but it makes our country far better, and greatly increases total societal utils. I don’t care if Grandpa wants to look at old brownstones, he’s causing ridiculous harm to others, the country, and future generations that dwarfs this. And certainly some compensations can be built in if existing locals lose a lot; that can be a principle of the law.

    Of course you want some smart zoning – there are tons of externalities when people live together closely, and use of existing and necessary new infrastructure should be paid for by new residents, but the zoning should be for the greater good, not the selfish locals at the great expense of the greater good, where the greater good is so often little considered, if at all.

    Ideally, there should be a federal law preventing locals (especially very focused, very activist, selfish locals) from trampling the greater good of the country for selfish reasons. That should be a federal principle of zoning law. Or too often selfish locals will expropriate their neighborhoods like their personal fiefs, as we too often see.

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  10. John writes:

    In re “the market” being frustrated by regulatory barriers:

    It is pretty amazing how a place like Germany– which is so regulated that homeowners can’t paint their houses certain colors– generates urban density.

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  12. Ignacio writes:

    Let’s put it this way: governments (local, state federal) are PART of the market economy. A more or less important part, but there is no correlation between big/small government and social development. The “getting government out of the way” meme is just part of the game of some powerful market players trying to increase their share in total markets.

  13. Mitch writes:

    It seems pretty clear that urban density generates positive externalities. Thus, if left to the free market alone, we would not get enough of it. Thus, a market intervention (zoning restrictions, subsidies, etc) of some sort would be required.

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  15. Becky Hargrove writes:

    I am right there with you on this issue – the way I thought about it was, how do we respond to a city when it says that it is full? This can easily be misunderstood and misconstrued, and at least once recently when I said something like ‘more power to walkable cities!’ my comment was deleted. Perhaps the best way to deal with it is to cater (in flexible zoning and regulation terms) to the lifestyles that are actually emerging in the 21st century, for new economic areas of endeavour. For example, people with little money and no car want walkable cities, but in some cases, people with lots of money and no car want the same. How is it possible for them to live in close proximity? Sometimes when a city says that it is full, the best response may be to create new cities that are understood as having a preference for mid range densities or higher densities, especially given the fact that ownership of cars is more a matter of choice than definite reality as we move ahead. Living in the South with no car in the present is a huge handicap that especially needs to be overcome.

  16. One thing the ‘econourbanists’ completely ignore is the role of income inequality (as well as wages). Yes, housing is limited, but the wealthy are able to bid up prices in the best neighborhoods, driving prices higher in ‘non-best’ neighborhoods.

    The other topic that doesn’t seem to be mentioned is the ‘zoning out of the poor’: poor people are forced to live in cities (I’m excluding rural areas from discussion) because there is no affordable housing due to suburban zoning rules. This drives up rental rates on the low end (and also makes urban schools have lower test scores, increasing competition for the few ‘good’ urban neighborhoods).

    Seems important, if not part of the libertarian or neo-liberal agendas.

  17. Lord writes:

    While eliminating zoning laws would increase the elasticity of supply, it would always be far less elastic than demand. Structures are durable and expensive, often more durable than human lives, so while supply would increase, it would not lower real rents much. In fact, higher densities will increase both incomes and rents and property values. This is good for non occupant owners and developers who would see property values rise significantly. It is largely neutral for occupant owners who see their imputed rent rise along with property values. A high rise next to a single family home will increase its property value but may lower its use value, and unless and until they are willing to cash out or develop their own property will not benefit from it. Their income may increase if they are young and work but otherwise it is little different from inflation in a commodity. Non owner occupants will see both incomes and rents rise and it will depend on whether they are young and work whether they see real rents rise or fall. We would see more smaller newer units which may be preferable to shared larger older units and these would limit the rate of rent increases, but this preference will vary. Zoning and regulation keep property values down and rents less than they otherwise would be, so rents are too damn low would be more accurate. If there is one regulation that does more than any other, it is rent control, and eliminating it would force those who can’t afford it to move out and provide opportunities for others to move in, but no one would assume this would lower rents. It would put potential occupants on equal footing though rather than entrenching a privileged few.

  18. davver writes:

    Housing isn’t very expensive in NYC. Its not even that expensive in Manhatten. Simply move to a “bad” neighboorhood. I lived in NYC, you can get cheap apartments in bad neighborhoods.

    People are paying extra money to get away from proles. In NYC people simply have more money with which to bid up the right to not be around proles because there are a lot of good jobs there. If you made housing more affordable proles would move in, which defeats the entire purpose of paying more for rent. The high price is a feature (it keeps the riff raff out) not a bug.

  19. Mike Huben writes:

    Zoning: A Reply To The Critics
    Bradley C. Karkkainen’s article from the Journal of Land Use and Environmental Law. A scholarly examination of the arguments for and against zoning. It provides strong rebuttals to libertarian positions, a plausible explanation for the value of zoning and why it is so prevalent (Houston is the ONLY major US city without zoning.)

  20. I am all for doing a “Yoram Barzel” and looking at economic rather than formal property rights as the basis for analysis. But there is a layer of policy analysis here that is being missed and that is the difference between rules and discretion. It is fine to have clear rules for regulating property use — Germany makes such systems work well. As you intimate, local covenants are another way to manage interactive property use. What is not fine is relying on official discretions. That is a “permit raj” and they are simply never a good idea. They inevitably get “gamed”, are avenues for corruption, create insiders and outsiders, frustrate innovation and generally promote wasteful inefficiency that gets in the way of both economic efficiency and social equity.

  21. The property rates are growing every year. The rates increases every year with the new budget.

  22. racing writes:

    Strangely silent commentariat even for the New Year. Perhaps it’s the climate change affecting propensity to punditize on East Coast?Anyway, what’s the range of the young man’s first possible audacious moves? We all know about the time afforded by the mourning rituals; and we hear all the time about a 3rd test threat (boring); but what could he do that would actually surprise us?Turn up in Seoul at March Nuclear Security Summit and invite everyone to emulate the DPRK’s nuclear security procedures?What else?

  23. Lennyh4747 writes:

    I am for the common good. Whose common good? My common good defined by me. The common good would be to let East Texas Christians live rent free in New York City. Also you can live in a southern city
    without a car. Houston has great mass transit even in the hot summer. Problem, even in no zoning Houston you cannot build a building without providing parking. In Houston, to house people you have to house cars. I do not like this but I want Houstonians to make rules for Houston not Washington or Brussels.

  24. Jerry Fields writes:

    OK. Let’s make explicit the underlying issue here. The issue is power and its relationship to property. Property is power, and has been since the beginning of civilization, and concentrations of power are toxic to democracy. The continuing theme of U.S. history is an attempt to redistribute power to perfect democracy, and this has almost always required a redefinition of property rights. From universal male suffrage (contrasted with property suffrage), to ending slavery (talk about an expropriation of property!) to child labor laws (this company is mine and I can hire whom I want), to income tax (this money is mine and you can’t take it), each advance in democracy has changed (destroyed) property rights. We have done and will do it with frequency. So if, as a society, we wish to change zoning it should be done by the entire community, not just by the property owners. And if we had assumed that it was impossible to annul the power of property in the past we would live in an even more undemocratic national than we currently inhabit. Change the blasted zoning laws, and the brownstone owners be … d—d. If the elite “just move away” as stated above, we’ll catch up with them eventually. It’s a continuing battle.

  25. Gso writes:

    “If I purchase a home in an expensive city, in a “nice, stable neighborhood with good schools”, I’m paying for a lot more than dirt. Yes, I am paying for proximity to my prosperous city’s opportunities and amenities, but that is not all. I am also paying for the fact that not only my home, but my neighbor’s home, is being put to a use that pleases me and to which I would consent.”

    I really hope this reflects how you think most people relate to this, and not reflects your own analytical thinking on law and economics.

    There are laws handing out subsidies to solar power, but i would never buy a plant producing solar cells thinking that these current laws were something I was entitled to from here to eternity. Regarding zoning rules as entitlements of the owner of the dirt seems like crazy legal and economic thinking to me. Talking political reality, then you are on to something.

    There is a big difference between agreeing to a mutual cantractual clause with your neighbour restricting the use of the two properties, and demanding that the government restricts the use of your neighbours property. In the first case you accept a possible restriction on the value of your land. In the second you want the government to deny your neighbour a profit, without writing of the possibility that you take that profit in the future. In the first case the market may secure a change by buying both properties.

  26. reason writes:

    I apologise in advance to anybody has made the same points I’m about to make, I only quickly scanned the thread.

    I care deeply about this issue, but I think both Steve and the others are on the wrong track. I think the key is this:
    “If “the market” were not frustrated by regulatory barriers and “NIMBY” politics, profit-seeking housing developers would build to sell into expensive markets, and this problem would solve itself.”

    The reason even housing developers can’t solve this problem is INFRASTRUCTURE. Infrastructure is never adequatedly provided privately. And for it to be scalable (i.e. able to cope with increased size and density) it has to be planned for in advance. The solution is to plan for new dense communities to COMPETE with the existing ones. And that means the first thing you need is rapid and frequent transport links to existing dense cities. We need new urban communities to compete with unplanned suburban communities. The model shouldn’t be megapolis – it should be the Randstad or Rhein-Main gebiet.

  27. “but I want Houstonians to make rules for Houston not Washington or Brussels.”

    So Houstonians should be able to screw the other 99+% of the world and only selfishly do what’s best for them? They should be able to dump massive toxic waste in everyone elses air, because it’s best for Houstonians? The country is far worse off when we put states’ and locals’ rights ahead of Americans’ and just people’s rights and lives.

  28. Lennyh4747 writes:

    We all share the same atmosphere and oceans. We do not all share the same Brownstones. To say that certain zoning laws are better than others needs to be discussed. I do not think the writers of the books Steve talks about are suggesting laws be passed to tear down the brownstones to build a chemical plant. Maybe a chemical plant in the middle of Manhattan would make money and all would benefit dear comrade. Does the top 10% want the 89% to vote in laws so that the top 10% can take property from the 1%. If so make it a local battle. Our housing and transit in Houston are fine, especially for poor people. What we do not need is Yankee carpetbaggers and local scallywags messing up our local community.

  29. Certain things locals are better at than feds (and lots of things they’re way worse, with ridiculous diseconomies of scale and complication, and with not meeting certain minimum standards that all Americans should be able to expect anywhere). But locals can seize an area and make it their own personal fief and screw the rest of the country. We want our properties to be worth millions, so we won’t allow the building of new units so others can enjoy the city too, and don’t have to spend hours in transit per day. It’s I get more money at the great expense of the rest of the country. I’d rather have the country be a lot better off and have far more people be able to enjoy the cities, and a much more productive country. It’s not the incumbents own little fief.

  30. Lee writes:

    Robert Nelson and Bill Fischel both described zoning as a form of property rights decades ago. See, e.g., Nelson, Zoning and Property Rights (1977); Fischel, The Economics of Zoning Laws (1987). A significant amount of legal scholarship on land use has built on this insight.

  31. oliver writes:

    From Wikipedia:
    The French word bourgeoisie (citizen class) became a term of English usage denoting a social class oriented to materialism and hedonism, and to upholding the extreme interests of the capitalist class.[2] In the pre–Revolutionary French feudal order, the term bourgeois denoted a social class that comprised the wealthier members of the Third Estate, the commons of the French realm. The term bourgeois derived from the Old French burgeis (walled city), which derived from bourg (market town), from the Old Frankish burg (town).[3] Since the 19th century, bourgeoisie usually is synonymous with the ruling upper class of a capitalist society,[4] although currently the word is less used to describe countries with Common Law jurisdictions. See the Middle English burgeis, the Middle Dutch burgher, Polish burżuazja(often referred to inteligentsia) and the German Bürger (burgess). A bourgeois (or bourgeoise in case of a woman) was also a person born within the walls (or within the space where the walls stood before) of the city where both parents were also born (within the walls). In this case it did not necessarily imply the person was wealthier than others.

    To add my 2 cents as an architect, I would say that the vision all three of you have in common, is a modernised version of the city as home of the bourgeoisie as described above. Since mesopotamian times, and I suspect before, ‘urban’ and ‘rural’ were the two categories that separated the primitive and poor from the sophisticated and well off. There was little in between. Suburbia was an attempt to create a middle class space that would combine the best of both worlds. It can be traced back to 18th century England and is probably a reaction to a: the grime of industrialised cities and b: the relative security that came with technologically advanced societies. A third ingredient, the automobile, is what made it such a success in the US. Most cities in the US, especially in the West, were planned and built around the automobile. The concept and the whole lifestyle that goes with suburbia is wedded to the ‘American Dream’.

    As such, I doubt that the biggest problem in getting people to live in high density areas, is lack of affordable housing. The biggest problem is, that people have come to value home ownership and conveniencies such as cars, gardens and quite generally having lots of living space over the comparative advantages of living in dense areas. Suburbia is part of ‘freedom’. Cities do grow and people want to live in them, just not slap bang in the middle in a high rise, but rather within comfortable commuting distance in their own house. Without external contraints, this usually yields such lovely urban carpets as L.A., Sao Paulo or Beijing.

    Another problem with changing the urban fabric to suit current ideals is that buildings tend to live a lot longer than humans – or at least they should if they are to be considered ecologically sound. Further, buildings are built around infrastructure that has an even longer life span. Together with topography and other environmental factors (earthquakes, floods etc.), this often limits what can reasonably be achieved within an urban area. Fiew cities have benefitted from such external constraints, most notably New York (island) and Hong Kong (island + steep mountain+ tiny country). But outside of these exceptions, the art of urban planning is usually the impossibly slow attempt to manage the unmanageable.

    I also doubt whether density alone is a quality. You rightly mention slums as bad examples, but I’d add that many cities that are considered beautiful and worth living in (despite high rents), such as Paris, San Francisco, Berlin, Barcelona have other qualities, that are often the result of positively totalitarian planning processes, highly cultivated artisanry or exclusive bourgeoie culture with manic attention to detail – all antithetic to lazy libertarianism.

  32. This is very in depth. Well done, zoning laws and property rights are an ever changing animal so its nice to see someone truly knowledgeable for a change.

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  36. beowulf writes:

    Countervailing forces Waldman.
    I’m a big fan of the Universal Living Wage agenda. Tie metro area’s minimum wage to its housing costs (in short, look at local HUD affordable rent index and multiple a by 3, that’s your minimum wage, NY and DC would be over $20/hr). Phase it in over 10 years to give city fathers plenty of time to decide whether they want low wages and low rents or high wages and high rents and to adjust their zoning code accordingly.

    Politically this is neat because, 1. there’s no federal budgetary cost and 2. Sunbelt Republicans would be attracted to an idea that’d accelerate the relocation of businesses from higher rent Blue States to lower rent Red States. To put it another way, the more traumatic the local political backlash in Boston, New York and Los Angeles, the greater likelihood it has of passing Congress. Good times.

  37. Seems these economic debates become much more intelligent when people start discussing concrete issues like housing (probably even better: a specific development project proposed in a particular city) than “markets” in general.

  38. ezra abrams writes:

    it is really hard to avoid the impression that anyone who uses the word “NIMBY” in a negative way isn’t a hypocrite (1)

    As you must know, large parts of NYC, not far from the core, contain a lot of low rent, low rise housing that could easily be upgraded if demand was there (2)

    In the ’60s, I met an old guy who in the ’50s built hitech scientific electronic instruments (vacumn tube version of CSI)
    And NYC was the only place in the country where you could walk down the street, or whatever, and get a machined aluminum jobber, or a guy who could do vacumn tube board assemblye, and in the pre FEDEX days, you could get it to your factory.
    With FEDEX, what is the point of NYC, which, as you may know, was built on a Harbor (3)

    1) In Texas, the rich argue forcefully against the socialist evil of zoning; however, the 1st thing a person does when they are rich is buy a house in a planned or gated community

    2) I went to graduate school at Albert Einstein in the Bronx; at that time, in the early ’90s, at the corner of the Grand Concourse, and Fordham Road, formerly a hi rent district, was a movie palace, frozen in time, untouched except for the grime

    3) the finest collection of colonial houses in america is in Salem MA, once the countrys largest, or nearly largest Seaport; the Salem customs house was responsible for an astonishing fraction of he young nations revenue. Then, all of a sudden ships got bigger, to big for Salem’s shallow harbor, and the city crashed, and stayed frozen till yuppies discovered in recently

  39. beowulf writes:

    Salem is a beautiful town, score one for the yuppies.