May 18, 2013
Stern on State Legislative Checks and Judicial Takings
Here's another recently-posted paper from Stephanie Stern (Chicago-Kent): Protecting Property Through Politics: State Legislative Checks and Judicial Takings, forthcoming in the Minnesota Law Review. The abstract:
In the 2010 Supreme Court case Stop the Beach Renourishment v. Florida Department of Environmental Protection, a plurality of the Court launched judicial takings in political and scholarly debate and laid the groundwork for expanding the Fifth Amendment to encompass court decisions. This Article explores a neglected institution in the debate over judicial takings — state legislatures. In the comparatively rare instances when state courts overreach, state legislatures can revise state court decisions and restore private property rights. Through case studies of state legislative checks of judicial activism, I examine the comparative institutional advantages, and the potential gaps, of situating primary responsibility for state court revision in state legislatures. In view of takings federalism and the costs of judicial takings, I contend that the existing balance of state legislative checks and state court restraint works well enough to police against state court property activism.
May 18, 2013 in Caselaw, Constitutional Law, Eminent Domain, Judicial Review, Politics, Property Rights, Property Theory, Scholarship, State Government, Supreme Court, Takings | Permalink | Comments (0) | TrackBack
April 19, 2013
Stern on Residential Social Capital's "Dark Side"
Stephanie Stern (Chicago-Kent) has posted The Dark Side of Town: The Social Capital Revolution in Residential Property. Here's the abstract:
Social capital has pervaded property law, with scholars and policymakers advocating laws and property arrangements to promote social capital and relying on social capital to devolve property governance from legal institutions to resident groups. This Article challenges the prevailing view of social capital’s salutary effects with a more skeptical account that examines the dark side of residential social capital — its capacity to effectuate local factions and promote restraints and inegalitarianism that close off property. I introduce a set of claims about social capital’s dark side in residential property and explore these points through the examples of local racial purging, land cartels, and residential self-governance. First, contrary to the assumption of a social capital deficit, residential racial segregation and land cartelization, perhaps the deepest imprints on the American property landscape today, suggest an abundance of local social capital and possible unintended consequences of interventions to build social capital. Second, “governing by social capital,” or relying on social capital for property self-governance, may empower factions, breed conflict, and increase the demand for residential homogeneity as a proxy for cooperation. In light of the mixed evidence for social capital’s benefits and its sizable dark side, the more pressing and productive role for property law is not to promote social capital, but to address its negative spillovers and illiberal effects.
April 17, 2013
Fennell on Crowdsourcing Land Use
Lee Fennell (Chicago) has posted Crowdsourcing Land Use, 78 Brook. L. Rev. ___ (forthcoming 2013). In it she looks ahead to the possibilities for emerging information technology to provide platforms for sharing data about land use impacts and preferences as well as landowner intentions. The last of these involves a proposal for the creation of publicly facilitated options markets in land use rights, an idea she previously outlined in her 2011 piece Property and Precaution (Journal of Tort Law, 2011). Here's the abstract for the Crowdsourcing article:
Land use conflicts arise from information shortfalls, and avoiding them requires obtaining and using information. Yet traditional forms of land use control operate in relative ignorance about landowner intentions, about preferences for patterns of land use that do not presently exist, and, more fundamentally, about land use impacts as they are experienced on the ground. Because information is expensive to gather and use, this ignorance may be rational. New technological and theoretical advances, however, offer powerful ways to harness and deploy information that lies dispersed in the hands of the public. In this symposium essay, I assess the prospects for an increased role for crowdsourcing in managing land use, as well as the limits on this approach. Governments must do more than elicit, aggregate, coordinate, and channel the preferences, intentions, and experiences of current and potential land users; they must also set normative side constraints, manage agendas, and construct appropriately scaled platforms for compiling and using information.
April 12, 2013
AALS Workshop on Poverty, Immigration and Poverty/Perry on Gentrification and Transracial Adoption
I got my registration brochure this past week for the AALS Midyear Meeting to be held in San Diego in early June. Along with two criminal justice programs, it features a Worskhop on Poverty, Immigration and Property that brings together a fascinating mix of presentations from scholars frequently referenced on your favorite land use law blog. Unfortunately, I won't be able to attend; but, I look forward to seeing the papers.
One panel that drew my eye features work from David Reiss (Brooklyn), Marc Poirier (Seton Hall) and Twila Perry (Rutgers-Newark). We have previously blogged about related work by David and Marc. Prof. Perry has written extensively about transracial adoption, but I was not familiar with her work prior to receiving the mailing. She will be presenting in June on Gentrification: Race, Class Law and the Integrationist Ideal. I came across an earlier work she published comparing gentrification and transracial adoption entitled Transracial Adoption and Gentrification: An Essay on Race, Power, Family, and Community, 26 B.C. Third World L.J. 25 (2006). Here's the abstract:
In this article, Professor Perry finds common ground between the two seemingly disparate contexts of transracial adoption and gentrification. Professor Perry argues that both transracial adoption and gentrification represent contexts in which, in the future, there may be increasing competition for limited resources. In the former case, the limited resource is the healthy Black newborn. In the latter, it is desirable, affordable housing in the centers of our cities. After explaining how a competition between Blacks and whites over Black newborns could arise, Professor Perry argues that in any such competition, Blacks will increasingly find themselves at a disadvantage stemming from the consequences of institutionalized racism. The article argues that there is a public discourse in both contexts that blames Blacks for the problems facing Black families and Black communities and valorizes whites who transracially adopt or move into inner-city neighborhoods undergoing gentrification. Professor Perry urges increased government involvement to preserve Black families and to protect Blacks against the displacement that often results from gentrification.
March 25, 2013
Poirier's Comparative Analysis of the Right to Dwell
Marc Poirier (Seton Hall) has posted Brazilian Regularization of Title in Light of Moradia, Compared to the United States’ Understandings of Homeownership and Homelessness, __ U. Miami Inter-Am. L. Rev. ___ (forthcoming). Here's the abstract:
This Essay considers the cultural resonances of regularization of title (regularização) for homeownership in the favelas of Rio de Janeiro. It compares those resonances to the cultural meaning of homeownership in the United States. Brazil’s approach is informed by an understanding of moradia, a right to dwell someplace, that is a far cry from its typical English translation as a right to housing. Brazil also draws on constitutional provisions and a long Latin American tradition concerning the social function of property, as well as a general theoretical understanding of the right to the city and of cidadania, a certain kind of citizenship. All of these frames construct homeownership as a gateway to interconnection and full participation in the life of the city. This is distinctly different from the individualistic cast of the prevailing understanding of homeownership in the United States, as personal success and the achievement of wealth, status, and a private castle.
The Essay also considers the standard United States construction of homelessness, which again tends to frame the issue in terms of individual responsibility or blame or of the role of institutional structures as they affect individuals, and typically fails to recognize the effect of having no property on relationships and interconnectedness and ultimately citizenship. The Essay advances five reason for the differences between Brazilian and United States understandings of homeownership. These include very different histories concerning the distribution of public lands; the absence in United States property jurisprudence of anything like the notion of a social function of property; the physical invisibility of informal communities in the United States; United States jurisprudence’s rejection of vague, aspirational human rights claims as law; and an insistence in United States jurisprudence on legal monism and an abstract, universalizing account of property ownership that valorizes one-size-fits-all law rather than case-by-case accounts of how land and dwellings are managed by various local communities.
Finally, the Essay observes a recent groundswell of United States scholarship that debunks “A own Blackacre” as an adequate account of the ownership of land and homes, insisting on a more race- and class-informed account as to both the history of homeownership and possible solutions for providing secure dwelling for the poor. The Essay recommends a convergence of studies of informal communities worldwide with a more nuanced, race- and class-informed understanding of homeownership.
February 20, 2013
Serkin on The State's Constitutional Obligations to Property Owners
Christopher Serkin (Brooklyn) has posted Affirmative Constitutional Commitments: The State's Obligations to Property Owners, Brigham-Kanner Property Rights Conference Journal, Forthcoming. The abstract:
This Essay, prepared for the 2012 Brigham-Kanner Property Rights Conference, argues that social obligation theories in property generate previously unrecognized obligations on the State. Leading property scholars, like Hanoch Dagan, Greg Alexander, and Eduardo Peñalver, have argued that the institution of property contains affirmative duties to the community as well as negative rights. This Essay argues that those affirmative duties are two-way streets, and that moral bases for social obligations also generate reciprocal obligations on the State to protect property owners. The social obligation theories rely upon a dynamic not static vision of property rights. The community’s needs change, the conditions of ownership change, and the appropriate allocation of benefits and burdens within a society changes over time. Therefore, a legal obligation that is justified and permissible at the time it is enacted because it is consistent with moral obligations may become impermissible over time, even if the content of the legal obligation does not change. At the extreme, the State’s failure to respond to certain kinds of changes in the world can lead to a regulatory taking.
An interesting and important take on some of the implications of progressive property theory. Especially interesting is Serkin's appreciation for the changing social notions of property over time, and how that challenges static notions of property rights and obligations.
January 16, 2013
MacLeod on Values in Land Use Regulation
I just received in the mail yesterday a copy of the first issue of Vol. 101 of the Kentucky Law Journal. It features a great new article by former LUP guest blogger Adam MacLeod (Faulkner). Adam is a Visiting Fellow in the James Madison Program in American Ideals and Insitutions at Princeton for the current academic year. Adam's article is entited "Identifying Values in Land Use Regulation". Here's a selection from the abstract:
The rules governing the lawfulness of land use decisions are a mess. State enabling acts elide distinguishable and plural objectives of the police powers. Courts—especially state courts—generally fail to distinguish between different types of challenges and different types of land use regulatory actions. As a result, courts typically resort to the deferential position that the Supreme Court adopted in Village of Euclid, Ohio v. Ambler Realty Co., even where that standard of review is wholly inappropriate.
Meanwhile, the evidence is mounting that local governments often exercise their land use regulatory authority in arbitrary, irrational, and discriminatory ways. Without meaningful judicial oversight, parties are powerless to challenge these abuses. Meaningful judicial oversight would require some comprehensive account of the police powers, and particularly which regulatory objectives are permissible in which circumstances. No comprehensive account has emerged. Courts are understandably unwilling to scrutinize the regulatory objectives of local governments. And scholars remain trapped in zero-sum warfare between individual property rights and the collective interests served by political action.
This article offers a proposal to clarify the picture. The proposal is drawn from recent insights in perfectionist jurisprudence, and seeks to ground land use governance in rational objectives, while avoiding the false individualist-collectivist dichotomy. The proposal rests upon the perfectionist claim that there exist some basic human goods in which people participate communally, for the benefit of all, and that rights can and should be derived from these goods. States would do well to identify the connections between the police powers and these goods, and to require local governments to act rationally by preserving the conditions in which these common goods are realized by members of the community.
I am very excited about Adam's neo-Aristotelian project here. I am developing a piece on Catholic Social Teaching's insights about the parameters of a just economic order. Trying to move beyond the narrow redistribution controveries, I am interested in CST's ramifications for those aspects of immigration, education finance and land use law that create such strongly exclusive communities in supposedly free market societies.
October 24, 2012
Lehavi on Why Philosophers, Social Scientists, and Lawyers Think Differently About Property Rights
Amnon Lehavi (Interdisciplinary Center Herzliyah - Radzyner School of Law) has posted Why Philosophers, Social Scientists, and Lawyers Think Differently about Property Rights. The abstract:
is a powerful concept. It features prominently in academic and public
discourse. But it is also a source of ongoing confusion. While some of
this disarray may be attributed to the success of “disintegrative”
normative agendas, much of it is the result of a methodological and
conceptual disconnect both within and among different fields of study.
Aimed at narrowing this gap, this Article analyzes the transformation of
property from a moral and social concept into a legal construct. It
seeks not to develop a historical or intellectual account of such an
evolution, but to analyze the institutional and structural features of
property once it is incorporated into the legal realm.
The Article identifies the unique jurisprudential ingredients of a system of rules by which society allocates, governs, and enforces rights and duties among persons in relation to resources. It examines the work of decision-making institutions entrusted with the task of designing property norms over time. Clarifying the institutional and structural attributes of property does not require, however, adhering to a uniform body of substantive norms or to a single set of underlying values. Illuminating the construction of property allows rather for a better informed debate about the socially-desirable content of property rights.
Rose on Property and Emerging Environmental Issues--Optimists vs. Pessimists
Carol M. Rose (Arizona) has posted Property and Emerging Environmental Issues--The Optimists vs. the Pessimists, 1 William & Mary Brigham-Kenner Property Rights Conference Journal 405 (2012). The abstract:
Can property rights and markets address environmental issues? Some say yes and some say no. This article tracks the debate through several iterations, beginning with the 1980 bet between by the biologist Paul Ehrlich and the economist Julian Simon. The former bet that the world was exhausting its natural capital and that a particular basket of minerals would therefore increase in price, while the latter bet that human ingenuity would substitute for natural capital and make prices fall. The optimistic Simon won that bet, but another version of the debate was soon to come, with free market environmentalists asserting that property and markets can evolve even for diffuse environmental resources. But more pessimistic commentators point out that success is not assured, and that social and political factors, and even past property rights regimes, can present substantial obstacles. The upshot appears to be that if one is to be optimistic about property and market approaches, one must be optimistic about social and political factors as well.
October 05, 2012
Fennell on Resource Access Costs
Lee Anne Fennell (Chicago) is reconceptualizing transaction costs in property as Resource Access Costs, forthcoming in the Harvard Law Review. The abstract:
The Coasean insight that transaction costs stand between the world as we know it and an ideal of perfect efficiency has provided generations of law and economics scholars with an analytic north star. But for legal scholars interested in the efficiency implications of property arrangements, transaction costs turn out to constitute an unhelpful category. Transaction costs are related to property rights in unstable and contested ways, and they comprise a heterogeneous set of impediments, not all of which are amenable to cost-effective reduction through law. Treating them as focal confuses the cause of our difficulties in structuring access to resources (positive transaction costs) with the solution to the cost minimization problem presented by a world featuring scarce resources and positive transaction costs. A broader notion of resource access costs, appropriately subdivided, can correct problems of overinclusion, underinclusion, and insufficient specification in the transaction cost concept. The resulting analytic clarity will allow property theorists to contribute more usefully to solving resource problems.
The concept of transaction costs in property theory plays a big role in land use planning and practice, so reconceptualizing it as "resource access costs" can potentially have a big impact on the way we understand the economics of land use. Check out Fennell's latest must-read piece.
September 20, 2012
OK, I'll go ahead and post this . . . I wasn't sure if it was "blogworthy," but Steve Clowney seemed to think so (or else he was really desperate for content when he saw this yesterday on my facebook page). To prove that even the musty old historically contingent property forms can have some modern relevance, I showed the class the ironic nostalgia of this hipster, courtesy of former student Uri Heller:
And the crazy thing is that it got a half-decent laugh. Data point #2 in why I am worried about this Section of students is that yesterday--it being Sept. 19, of course-- I wished them a happy International Talk Like a Pirate Day. (Pirates are certainly interested in acquiring your property through subsequent possession.) Then--and this is what has me really worried--they actually laughed again when I mentioned that I was unable to take my 12-year-old daughter to the pirate movie . . . why?
. . . Because, of course, it was rated Arrrrrrrrrrrr.
I would have thought these students would have had a little better taste in humor. But at least they are so highly motivated for law school and property class that they are willing to find (or pretend to find) humor in some of the more obscure aspects of Property I.
September 09, 2012
Iglesias on Reunifying Property in the Classroom: Starting with the Questions
Tim Iglesias (San Fransisco) has posted Reunifying Property in the Classroom: Starting with the Questions, not the Answers. The abstract:
essay argues that the myriad property doctrines and rules are answers to
several consistent legal questions, and that these questions provide a
useful framework for teaching Property law. The problem with Property
Law courses is that we cover a slew of topics in which we load students
up with a wide variety of (often conflicting) answers to these questions
without ever revealing that all of the doctrines and rules are
responses to the same set of questions.
The proposed framework offers the questions as reference points for navigating the sea of common law Property doctrines and rules. A student still must deal with the treacherous straits of the Rule Against Perpetuities and similar difficulties. However, using the framework of questions she can always look up to see key questions and thereby orient and guide herself to an answer (or set of possible answers).
This is simply a must-read for anyone teaching property and land use. Prof. Iglesias provides a great overview of some of the contested questions in teaching property, and suggests that regardless of the particulars of theory and doctrine that we choose to teach, we can all profit from thinking hard about the common questions that property issues present. The essay might be helpful for property students as well.
September 05, 2012
Pomeroy on the Case for Standardized Vesting Documents
Chad Pomeroy (St. Mary's) has posted A Theoretical Case for Standardized Vesting Documents. The abstract:
real estate professionals, and lay people throughout the country rely
on the recording system to provide critical information regarding
ownership rights and claims. Indeed, the recording system acts as a
virtually mandatory repository and disseminator of all potential
parties’ claims. This system, in turn, relies on these claimants and
their agents to publicize their claims: property purchasers, lenders,
lien-claimants, title companies, attorneys - these parties interact,
make deals, make claims, order their affairs, and then record. The
information system available to us, then, is only as good as what we
make of it and what we put into it.
As such, it is surprising how little thought has been put into exactly what it is that we record. Should the mortgage of a lender in Ohio look like that of a lender in Florida? Should a deed from an individual in Texas differ from that of a corporation in Nevada? As it stands now, no one familiar with real estate law or commerce would expect different parties in different jurisdictions to record identical, or even similar, instruments. In an immediate sense, this heterogeneity of the recorded documents (“vesting heterogeneity”) does not seem a good thing: parties utilizing the recording system generally seek to make known, or to discern, the same generic type of information – that is, evidence of claims upon property – so why are different forms and types of documents utilized all over the country?
This article analyzes this vesting heterogeneity from a new perspective and concludes that it is, in fact, cause for significant concern. Vesting heterogeneity has arisen organically, growing with the recording system as they both evolved over time. This historical explanation does not, however, excuse the cost associated with such a lack of uniformity. Anyone seeking information with respect to any piece of property must navigate the complexities and uncertainties that arise because all such information is heterogeneous and, as a consequence, difficult to understand and utilize. This represents both a immediate transactional cost and an increased risk of ill-informed behavior.
This is particularly troublesome because this sort of cost-based concern arising from variability has a well-established analogue in property law that the law clearly desires to avoid. That analogue is the cost that would arise if property law were to permit unlimited property forms and gives rise to what is known as the numerus clausus theory. This theory explains the law’s hostility toward new, or different, types of property and holds that such heterogeneity is not generally permitted because of the extremely high informational costs associated with such creativity.
This article suggests that this common law concept can, and should, inform our analysis of vesting heterogeneity and that it precipitates strongly against such lack of uniformity. This is because the costs that drive the numerus clausus to hold that variability should be limited are strikingly similar to those created by variability of vesting documents. As such, this theory is relevant here such that the same analysis should be applied to vesting heterogeneity by asking whether a different (or “new”) document is helpful enough to outweigh the informational costs inherent therein.
Based on this reasoning, this article concludes that the law is wrong to systematically ignore heterogeneity in vesting documents. Instead, a numerus clausus type of analysis should be applied to new or different vesting documents to determine whether any inherent lack of uniformity is defensible. Where it is not, uniformity should be imposed.
August 30, 2012
Singer on the Rule of Reason in Property Law
Joseph Singer (Harvard) has posted The Rule of Reason in Property Law (UC Davis Law Review, 2013). The abstract:
rights cannot work if they are not clear, and scholars generally assume
that the best way to attain this goal is to define property rights by
relatively rigid rules. However, recent evidence suggests that the
intuitive view may be mistaken. The subprime crisis shows that clear
rules do not produce clear titles if owners do not follow those rules.
And during the twentieth century property law moved dramatically away
from rigid rules toward flexible standards. Standards turn out to be
crucial to property law, as well as increasingly important in property
Empirical evidence and historical experience alike demonstrate that rules cannot be applied without being supplemented by standards to determine the scope of those rules. Conversely, standards achieve predictability through core exemplars, precedent, and presumptions. Thus rules and standards are less distinct from each other than one might imagine. Standards perform crucial functions for property law. They perform systemic functions to shape the infrastructure and the outer contours of the property system by (1) setting minimum standards compatible with the norms of a free and democratic society, (2) protecting the justified expectations of consumers, and (3) responding to externalities and systemic effects of the exercise of property rights. Standards also determine the scope of property rights by (4) distinguishing cases; (5) resolving conflicting norms; (6) excusing mistakes; (7) escaping the "dead hand" of the past; and (8) deterring the "bad man" from abusing property rights.
A few pages of the article discuss land use regulation and the shift from relatively rigid early zoning to a world in which "[n]egotiated zoning is now the norm." The core of the argument is that:
On the surface, negotiated zoning is less predictable than Euclidean zoning. One either was or was not entitled to build a certain type of structure under the old rules. But of course the predictability of traditional zoning rules was always a bit of an illusion. One could always seek a rezoning of the property by the city council, for example, or sue to obtain a variance. Since zoning boards are political creatures, they tend to grant variances if no one objects.
. . .
In some ways the modern system is more predictable. All one has to do is to obtain agreement among relevant actors within a regulatory framework. Determining whether one can or cannot successfully complete a planned development requires a prediction about whether one can convince relevant audiences that it is a good idea. Experienced developers are likely to be more accurate in guessing whether this is the case than in predicting the outcome of a lawsuit determining whether a rezoning is or is not "inconsistent with the general plan."
August 24, 2012
Stern on Property's Constitution
James Y. Stern (Virginia) has posted Property's Constitution, forthcoming in the California Law Review. The abstract:
Long-standing disagreements over the meaning of property as a matter of legal theory present a
special problem in constitutional law. The Due Process and Takings Clauses set forth individual rights that can only be asserted if “property” is at stake. Yet the leading cases interpreting constitutional property doctrines have never managed to articulate a coherent general view of property and in some instances reach opposite conclusions about its meaning. Most notably, government benefits are considered “property” for purposes of due process but not takings doctrines, a conflict the cases acknowledge but do not attempt to explain.
This Article offers a way to bring order to the confused treatment of property in constitutional law. It shows how a single definition of property can be adopted for all of the major constitutional property doctrines without the calamitous results that many seem to fear. It begins by arguing that property is best understood as the right to have some measure of legal control over the way a particular item is used, control that comes at the expense of all other people. It then argues that legal rights are a kind of private property and that, while courts and commentators are correct that legal entitlements to government benefits — so-called “new property” — should receive constitutional protection, they mistakenly believe the property at issue is the good that a recipient has a right to receive, rather than the legal right to receive it. The Article proceeds to show that legal rights are the only kind of things whose existence government can altogether extinguish and therefore that ownership of legal rights is the only kind of property right government can terminate without conferring equivalent property rights on others. The Article further argues that while due process protection should be read to apply whenever a person is denied an asserted property right (a deprivation), takings protection should only come into play when property rights are transferred from one party to another (a taking). Combining these observations, the Article concludes that termination not only of “new property” rights but also of old-fashioned in personam legal rights should trigger due process but not takings protection. This analysis provides theoretical coherence to constitutional doctrine that has thus far been lacking and it sheds light on the essential characteristics of property rights as a general matter, helping theoreticians understand more clearly the core structures of property law.
August 17, 2012
Davis on Adverse Possession as a Redistributive Tool
Tessa Davis (Tulane) has posted Keeping the Welcome Mat Rolled-Up: Social Justice Theorists’ Failure to Embrace Adverse Possession as a Redistributive Tool, Journal of Transnational Law & Policy, Vol. 20, p. 73, 2010. The abstract:
J.A. Pye (Oxford) Ltd.and another v. Graham and another (Pye), a recent U.K. case, raised the question of whether adverse possession may violate a human right to own property. The case implicated the then recent bringing adverse possession into the human rights realm. Yet, a review of the case as it moved through the U.K. courts and the European Court of Human Rights reveals, however, that courts have not embraced a consideration of adverse possession as playing a role in substantive human rights or social justice concerns. This is due, in part, to the dearth of human rights and social justice scholarship on the doctrine. Though human rights and social justice theorists have failed to fully develop the doctrine, their theories lay the groundwork for utilizing adverse possession as a tool to fashion new property systems. Utilizing adverse possession as a social justice tool can help foster systems with widespread property distribution while actively recognizing and supporting human rights of both owners and those seeking ownership.
Just today I witnessed a spirited discussion of adverse possession law, so its good to see some writing on the theory.
August 12, 2012
Penalver on Progressive Lessons from DeSoto
Eduardo M. Penalver (Cornell) has posted The Costs of Regulation or the Consequences of Poverty? Progressive Lessons from De Soto, which is a chapter from the book Hernando de Soto and Property in a Market Economy, (D. Benjamin Barros ed.), Ashgate, 2010. Penalver's abstract:
Commentators have often characterized Hernando de Soto's advocacy of formalization of title for landless squatters as right-wing. And de Soto seems to understand himself as an advocate of individual property rights and free markets. But his analysis of informality and redistribution has a subtext with potentially progressive implications. Although de Soto sometimes reflexively attributes informality to overregulation, informality can always also be characterized as the consequence of being too poor to afford regulated goods. Indeed, for any particular regulation that puts the regulated good out of reach of the poor, we can either attribute this consequence to the cost of the regulation or to the consequences of a distribution of wealth that makes the regulated good unaffordable to those at the bottom. Thus, if the regulation is a good one, its effect on price, and therefore on informality, may argue in favor of keeping the regulation but redistributing purchasing power to blunt its pernicious impact on informality. What we need is a way of evaluating regulations that goes beyond merely observing their impact on the cost of goods and, indirectly, on the prevalence of informality. Specifically, we need to be able to evaluate four different possibilities: (1) regulation with redistribution to offset the impact of the regulation on the poor; (2) regulation without redistribution with its attendant increase in informality; (3) redistribution without regulation; and (4) no redistribution and no regulation. Choosing among these options is the domain of applied political theory. The choice is a far more complicated and demanding task than merely observing that regulation without redistribution increases informality.
All of the contributions to the 2010 Barros-edited volume on DeSoto are extremely interesting and thought-provoking. Penalver's essay, just now posted on SSRN, pushes us to consider the property theory beyond the traditional political characterizations of DeSoto's ideas.
August 11, 2012
Can Eminent Domain Solve the Mortgage Crisis?
There has been some discussion over the past couple of months over an innovative proposal to have governments use the eminent domain power to take ownership of underwater mortgages, to decrease the risk of default and then refinance the obligations, all to promote the common good. Here are some links to give you a sense of the major points of this debate.
The launch of this idea comes from a proposal by Law Professor Robert C. Hockett (Cornell) in his piece It Takes a Village: Municipal Condemnation Proceedings and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation, and Local Economic Recovery. The abstract:
Respected real estate analysts now forecast that the U.S. is poised to experience a renewed round of home mortgage foreclosures over the coming 6 years. Up to 11 million underwater mortgages will be affected. Neither our families, our neighborhoods, nor our state and national economies can bear a resumption of crisis on this order of magnitude.
I argue that ongoing and self-worsening slump in the primary and secondary mortgage markets is rooted in a host of recursive collective action challenges structurally akin to those that brought on the real estate bubble and bust themselves. Collective action problems of this sort require duly authorized collective agents for their solution. At present, the optimally situated such agents for purposes of mortgage market clearing are municipal governments exercising their traditional eminent domain authority.
I sketch a plan pursuant to which municipalities, in partnership with investors, can condemn underwater mortgage notes, pay mortgagees fair market value for the same, and systematically write down principal. Because in so doing they will be doing what parties themselves would do voluntarily were they not challenged by structural impediments to collective action, municipalities acting on this plan will be rendering all better off. They will also be leading the urgently necessary project of eliminating debt overhang nationwide and thereby at last ending our ongoing debt deflation.
Professor Hockett's idea was then promoted in the media by, among others, Prof. Robert J. Shiller (Yale--Economics & Finance), in the New York Times Piece Reviving Real Estate Requires Collective Action. As the title indicates, Schiller theorizes the mortgage crisis as in part a collective action problem that can be addressed by Hockett's proposal to use eminent domain to seize underwater mortgages.
But eminent domain law needn’t be restricted to real estate. It could be applied to mortgages as well. Governments could seize underwater mortgages, paying investors fair market value for them. This is common sense too. The true fair market value for these mortgages is arguably far below their face value, given the likelihood of default, with its attendant costs.
Professor Hockett argues that a government, whether federal, state or local, can start doing just this right now, using large databases of information about mortgage pools and homeowner credit scores. After a market analysis, it seizes the mortgages. Then it can pay them off at fair value, or a little over that, with money from new investors, issuing new mortgages with smaller balances to the homeowners.
Yesterday in The Atlantic Cities, Amanda Erickson published an excellent overview story about the proposal, Can Eminent Domain Solve our Mortgage Woes?. Of note to us are the comments by the eminent eminent domain expert (that's not a typo) Prof. Thomas Merrill (Columbia).
It's a clever idea. But is it legal? "It's very unusual," says Thomas W. Merrill, a law professor at Columbia University who specializes in property law. But, he notes, "this doesn't mean it's unconstitutional."
Before the landmark 2005 Kelo vs. New London decision, Merrill says, there's little doubt that the courts have upheld this kind of law. "Before Kelo, courts took a hands-off approach," Merrill says. In the 1984 case Hawaii Housing Authority vs. Midkiff, the Supreme Court ruled that the Hawaiian legislature could take a property controlled by landlords and sell it back to leasees. "Condemning a landlord's interest in property to transfer to a tenant is not too different," Merrill says.
But Kelo changed that. In that case, the Supreme Court ruled that cities could use eminent domain to transfer land from one private owner to another, and that doing so for economic development purposes constitutes a public use. "At this point, I guess you'd have to say all bets are off in terms of what is and isn't eminent domain," Merrill says.
And finally for now, Prof. Richard Epstein is critical of the idea. From More Nonsense on the Home Mortgage Front: Don't Let Municipal Governments Condemn Mortgages at Bargain Rates:
The idea has already been rightly panned by the Wall Street Journal. But the entire proposal needs still further consideration. First off, Hockett and his group insist that there is a huge collective action problem that prevents the rationalization of mortgage matters. And there is. It is called local government regulations that have blocked the foreclosure measures set out above. Handle those and the externalities to which they refer disappear. No longer do we have owners neglecting property or clogging the courts with endless motions.
Again, this post is just to give you some links to look at the arguments. From my perspective, these are some fascinating arguments that illuminate not only the mortgage crisis but also the general debate over eminent domain.
August 11, 2012 in Constitutional Law, Eminent Domain, Finance, Housing, Local Government, Mortgage Crisis, Mortgages, Politics, Property Theory, Real Estate Transactions, Scholarship, Takings | Permalink | Comments (1) | TrackBack
August 09, 2012
Strahilevitz on Absolute and Relative Preferences in Property Law
Lior Strahilevitz (Chicago) has posted Absolute Preferences and Relative Preferences in Property Law, 160 University of Pennsylvania Law Review (2012). The abstract:
This article suggests that the population is roughly divided between individuals primarily oriented toward absolute gains and losses, and those oriented toward relative gains and losses. That is, some people consistently care more about the absolute size of the pie slice they are eating, and others care more about how their percentage of the pie stacks up against their peers’ portions. This article examines how property law deals with that heterogeneity in relative and absolute preferences. It focuses initially on inheritance law, particularly cases in which a decedent with living children has adopted her grandchild or someone else within the bloodstream, engendering results that might be acceptable to an heir with absolute preferences but unacceptable to an heir with relative preferences. The article then shows how similar controversies play out in takings law and the law of easements. In many of these cases vehement disagreements between majority opinions and dissents can be understood as clashes between jurists who are focused on absolute resources and those who are focused on relative resources. The article then hypothesizes that some relatively low-stakes disputes explode into contentious lawsuits precisely because a landowner oriented towards absolute gains and losses is incapable of understanding a conflict from the perspective of his neighbor, for whom relative preferences are decisive. The article concludes by referencing examples from takings law and the law of waste, in which divergent assumptions about the prevalence of relative and absolute preferences render property doctrines ambiguous, tenuous, or incoherent.
In addition to being an important piece on property theory generally, Prof. Strahilevitz specifically examines the land use topics of takings and easements. I think this analysis could also be extended to the debate over housing and urban form. A must-read.
August 06, 2012
Frischmann on Managing Congestion
Brett M. Frischmann (Cardozo) has posted Managing Congestion, which is a chapter from his book Infrastructure: The Social Value of Shared Resources, Oxford University Press, 2012. The abstract:
This chapter considers partially (non)rival infrastructure and congestion. Specifically, it explains and analyzes congestions problems and solutions. It begins with the basic economic model of congestion, which assumes homogenous uses, and discusses various approaches to managing congestion. It turns to more complex congestion problems, involving heterogeneous uses and cross-crowding, and discusses management options. The chapter evaluates congestion management strategies for infrastructures as well as the relationship between commons management and congestion management.
The SSRN document also includes the book's Table of Contents, so you can view the larger outline for this valuable book.