Friday, January 11, 2008

Nash on Economic Efficiency, Public Choice, and Property Rights

Jonathan Nash (Tulane) has posted Economic Efficiency Versus Public Choice: The Case of Property Rights in Road Traffic Management on SSRN.  Here's the abstract:

This Article argues, using the case of responses to traffic congestion, that public choice provides a greater explanation for the emergence of property rights than does economic efficiency. While the traditional solution to traffic congestion is to provide new roadway capacity, that is not an efficient response in that it does not lead to internalization of costs. Moreover, over time new capacity may serve to exacerbate congestion problems: New roadway capacity may induce additional travel that would not have taken place but for the new construction. By contrast, congestion charges - that is, imposing tolls designed to force drivers to internalize the costs that their driving imposes on other drivers offer an efficient way to address the problem of congestion. The continued popularity, despite this, of providing new roadway capacity turns upon public choice theory. New roadway construction tends to be very attractive for politicians as a way to satisfy both constituents generally, as well as interest groups that tend to be well-organized and powerful. In contrast, congestion charging regimes tend to be less popular across the board politically. At present, there appears currently to be something of a shift in position. Experimentation with congestion pricing programs is growing overseas including a notable program in London - and a serious proposal for New York City's central business district. This Article thus argues that, while political economy tends to be a powerful force, it is possible for concerns of efficiency to override (or at least to curtail) that force when the inefficiencies of a response grounded in political economy become too large. At the same time, public choice continues to hold considerable sway: The shift toward congestion pricing may require not only pressing efficiency concerns, but also a shift in the political climate, as evidenced by backlash against New York City's proposal.

Ben Barros

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January 11, 2008 in Property Theory, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Jacoby on Delinquency Management

Melissa B. Jacoby (UNC - Chapel Hill) has posted Homeownership Risk Beyond a Subprime Crisis: The Role of Delinquency Management on SSRN.  Here's the abstract:

Public investment in and promotion of homeownership and the home mortgage market often relies on three justifications to supplement shelter goals: to build household wealth and economic self-sufficiency, to generate positive social-psychological states, and to develop stable neighborhoods and communities. Homeownership and mortgage obligations do not inherently further these objectives, however, and sometimes undermine them. The most visible triggers of the recent surge in subprime delinquency have produced calls for emergency foreclosure avoidance interventions (as well as front-end regulatory fixes). Whatever their merit, I contend that a system of mortgage delinquency management should be an enduring component of housing policy. Furtherance of housing and household policy objectives hinges in part on the conditions under which homeownership is obtained, maintained, leveraged, and - in some situations - exited. Given that high leverage or trigger events such as job loss and medical problems play significant roles in mortgage delinquency independent of loan terms, better origination practices cannot eliminate the need for delinquency management.

One function of this brief essay is to identify an existing rough framework for managing delinquency. Legal scholarship should no longer discuss mortgage enforcement primarily in terms of foreclosure law and instead should include other debtor-creditor laws such as bankruptcy, industry loss mitigation efforts, and third-party interventions such as delinquency housing counseling. In terms of analyzing this framework, it is tempting to focus on its impact on mortgage credit cost and access or on the absolute number of homes temporarily saved, but my proposed analysis is based on whether the system honors and furthers the goals of wealth building, positive social psychological states, and community development. Because those ends are not inexorably linked to ownership generally or owning a particular home, a system of delinquency management that honors these objectives should strive to provide fair, transparent, humane, and predictable strategies for home exit as well as for home retention. Although more empirical research is needed, this essay starts the process of analyzing mortgage delinquency management tools in the proposed fashion.

Ben Barros

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January 11, 2008 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, January 10, 2008

Underkuffler to Cornell

This is somewhat old news that I missed when it first came out, but Laura Underkuffler is moving from Duke to Cornell.  With Greg Alexander, Eduardo Penalver, and Emily Sherwin already there, Cornell will now have one of the strongest property faculties in the nation.

Ben Barros

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January 10, 2008 in Teaching | Permalink | Comments (0) | TrackBack (0)

Teaching Order - Where Should Sevitudes Go?

It's been a crazy first week of the semester, but I'm finally starting to feel like things are under control.  Earlier in the week, I put together my syllabi for my property classes for this semester.  I'm teaching the second half of property to an evening section, and teaching the whole course to a day section.  This gives me a chance to test something I've been thinking about for a while.

Like most property profs, I have been teaching servitudes late in the course, as part of a larger unit on land use controls.  It has occurred to me, though, that it might make sense to teach servitudes earlier.  Servitudes are non-possessory interests in land, and can logically be placed after a unit on co-ownership of property.  This placement in the course would have the advantage of exposing students to servitudes before the unit on land transactions and title insurance, where many of the issues involve easements and covenants (e.g. marketable title, the warranty against encumbrances, and many recording cases).

So this semester, I'm going to teach servitudes in the traditional way in my evening section, and move it forward in my day section.  I'll let you know how it goes.

Ben Barros

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January 10, 2008 in Teaching | Permalink | Comments (2) | TrackBack (0)

White on Banning Subprime Mortgages

Alan M. White (Valparaiso) has posted The Case for Banning Subprime Mortgages on SSRN.  Here's the abstract:

While the subprime mortgage boom was in full swing, its benefits to American society were widely touted. Subprime mortgages were said to have increased homeownership. The subprime effect was supposed to have been especially strong for low-income and minority families previously unable to buy homes. The democratization of credit was also attributed to subprime mortgages.

The empirical data do not support these welfare claims. The U.S. homeownership rate increased somewhat between 1994 and 2007. Subprime mortgages, however, were mostly made to existing homeowners to refinance debt; very few were made to first-time home buyers. The number of homes lost due to subprime foreclosures significantly exceeded the new homeowners added by subprime mortgages. Subprime mortgages also displaced the safer and lower-cost FHA loans that would otherwise have been made. Conventional prime mortgages for purchases fully accounted for the observed increase in homeownership.

The welfare harms caused by subprime mortgage lending are readily measurable. They include the direct impact of more than two million foreclosures on families, the resulting property value losses, the social and fiscal impact on cities where subprime mortgages were concentrated, the price discrimination resulting in black and Latino homeowners paying unnecessarily high rates, and the broader impacts on the credit markets and the economy.

The disastrous consequences of subprime mortgage lending were in part the result of deregulating mortgage interest rates. Similar harms can be prevented in the future by reimposing reasonable interest rate limits on first-lien mortgages. FHA should be restored to its role as the primary provider of mortgages to first-time, low- and moderate-income home buyers.

Ben Barros

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January 10, 2008 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 8, 2008

Two by Freyfogle

Eric Freyfogle (Illinois) has two new posts up on SSRN.  They are:

Private Property: Correcting the Half Truths

Today's discussions about private land ownership and regulatory takings build upon a number of critical assumptions about how private property arises, how it relates to liberty, in what sense it is an individual right, what full ownership entails, and how property rights might legitimately change over time. This essay-excerpted from chapter 1 of a new book, On Private Property: Finding Common Ground on the Ownership of Land-steps back from contemporary debates to probe these fundamental assumptions. The assumptions, it claims, tend to be seriously flawed; they are no more than half-right, and need important revision to provide a solid foundation for evaluating where we stand and charting a course ahead. At root, private property is a social institution, created by law and lawmakers and appropriately revised, generation by generation. Private property does not exist primarily to protect individual liberty; indeed, it curtails liberty as much as it protects it. It makes little sense, also, to claim: that property begins when a person takes first possession of a thing; that private property can somehow be crafted as absolute; and that ownership necessarily entails expansive rights to develop. The situation is more complex, and property rights more pliable, tentative, and morally complex. Scholarly writing on private property would likely improve if commentators turned away from Supreme Court rulings on takings and focused instead on the fundamental elements of private property as an essential tool that society uses and continually reshapes to foster shared goals.

Property's Functions and the Right to Develop

At stake in most contemporary land-use disputes, particularly those involving regulatory takings, is the legal right of land owners to develop or otherwise alter their lands in significant ways. Landowners claim that they possess or should possess this power, while lawmakers conclude that a curtailment of rights would serve the public interest. For various reasons we've had troubles seeing this conflict clearly. What development rights should landowners possess, and what powers should government have to curtail or redefine them? To address these questions we need to see that private property is basically a tool that society uses to promote the common welfare; it is a social institution in which private owners call upon government (including police, courts, and even prisons) to curtail the activities of nonowners. To decide what development options owners ought to possess, given this moral complexity, we need to consider how a sound system of private property can in practice promote the common good.

This essay, drawn from a new book on private property, probes the three basic functions of private land ownership with particular regard for development rights. It also probes how increases in the development value of land are due not to labor expended by owners but to the activities of surrounding landowners as a community. This background sets the stage for answering the central question of development rights. A key conclusion is that, while landowners need and deserve substantial protection from interference with on-going activities, there is much less need to protect their hopes of initiating new land uses in the future. What landowners need most is not some protection against future laws limiting development but instead an assurance that such laws will apply widely to all similarly situated landowners.

Ben Barros

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January 8, 2008 in Property Theory, Recent Scholarship, Takings | Permalink | Comments (0) | TrackBack (0)

Monday, January 7, 2008

First few days of property: roundup of some of our favorite posts

So the new semester's about to start and that means first year students everywhere (or at least at a lot of schools) will be reading cases like Pierson v. Post and Johnson v. M'Intosh.  So I thought I'd round up a couple of propertyprof classic posts on the 1L chestnuts.

Here's some great talk about Pierson (from Rachel Godsil).
Go to school where Heppingstone v. Mammen is taught instead of Pierson?  Check out Carl Christensen's post on "the whale case."
Don't like how your property course is beginning, here are some other ways it might have begun.
Want to get a sense of what's coming?  Check out the five minute property class.
And want to see some faculty discuss their favorite cases?  Check out Ben Barros' post on favorite cases. That discussion is always sure to stir debate over Stambosky.

And for faculty, Rose has some advice here (and me here).

Other classic posts we should be linking to here?

Al Brophy
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January 7, 2008 in Teaching | Permalink | Comments (0) | TrackBack (0)