Saturday, December 31, 2005

Weekly Top Ten -- New Year's Edition

Quite a few changes this week as a number of articles drop off as no longer being "recent", giving us a fresh start for the New Year.

1. (300) Economic Analysis of Law, A. Mitchell Polinsky and Steven Shavell (Stanford Law School and Harvard Law School)

2. (277) The Measure of a Justice: Justice Scalia and the Faltering of the Property Rights Movement within the U.S. Supreme Court, Richard Lazarus (Georgetown University Law Center)

3. (258) How Overregulation Creates Sprawl (Even in a City without Zoning), Michael Lewyn (George Washington University Law School)

4. (148)  Information Asymmetries and the Rights to Exclude, Lior Strahilevitz (University of Chicago Law School)

5. (101) Property and the Public Domain, Hanoch Dagan (Tel Aviv University - Buchmann Faculty of Law)

6. (86) The Fall and Rise of Functional Property, Francesco Parisi (George Mason School of Law)

7. (77) Human Nature, the Laws of Nature, and the Nature of Environmental Law, Richard James Lazarus (Georgetown University Law Center)

8. (68) The Ownership Society & Regulatory Takings: Castles, Investments, & Just Obligations, Joseph William Singer (Harvard Law School)

9. (56) Gone Too Far: Measure 37 and the Perils of Over-Regulating Land Use, Sara C. Galvan (Yale University)

10. (55) Perpetuities or Taxes? Explaining the Rise of the Perpetual Trust, Max M. Schanzenbach and Robert H. Sitkoff (Northwestern University - School of Law and New York University School of Law)

Ben Barros

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December 31, 2005 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, December 22, 2005

Dobris on the RAP

Joel Charles Dobris (UC Davis School of Law) has posted a Comment on the Race to Repeal the Rule Against Perpetuities on SSRN.  Here's the abstract:

There has been a race to the bottom among a large minority of jurisdictions to repeal the Rule Against Perpetuities. This Comment discusses obstacles if we wish to rerun the race, at some point in the distant future, as well as some of the possible ways to bring back the Rule. The author also discusses the continued rejection of the repeal by academics. He concludes the professoriate may find it possible to live with the consequences of the race and that if the political will to bring back the Rule comes to exist, that Society will find a way to repeal the repeal.

Ben Barros

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December 22, 2005 in Future Interests and the RAP, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 21, 2005

Casas-Arce and Saiz on Do Courts Matter?

Pablo Casas-Arce (University of Oxford - Department of Economics) and Albert Saiz (University of Pennsylvania - The Wharton School) have posted Do Courts Matter? Rental Markets and the Law on SSRN.  Here's the abstract:

We argue that the allocation of ownership rights will minimize enforcement costs when the legal system is inefficient. In particular, when legal enforcement is costly, there will be a shift from contractual arrangements that rely on such enforcement (such as a rental agreement) towards other forms that do not (such as direct ownership). We then test this prediction on data on the rental housing market, and show that costly enforcement of rental contracts hampers the development of such a market in a cross-section of countries. We argue that this association is not the result of reverse causation from a developed rental market to more investor-protective enforcement. The results provide supportive evidence on the importance of contract enforcement for the development of financial and other markets.

Ben Barros

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December 21, 2005 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 20, 2005

My Book Buying Habits

From Amazon's recommendations for me:

The Death and Life of Great American Cities (Vintage) by Jane Jacobs (already have it)

Dora's Christmas DVD

Edge City : Life on the New Frontier by Joel Garreau

Takings: Private Property and the Power of Eminent Domain by Richard A. Epstein (already have it)

Blue's Clues - Classic Clues DVD

Understanding the Process of Economic Change (Princeton Economic History of the Western World) by Douglass C. North

Suburban Nation : The Rise of Sprawl and the Decline of the American Dream by Andres Duany, et al.

Dora's Storytime Collection (Dora the Explorer) by various artists

Contracting for Property Rights (Political Economy of Institutions and Decisions) by Gary D. Libecap, et al.

Rugged Riggz Construction Site Dump Truck by Little Tikes

Seems about right, though Dora has recently fallen out of favor a bit, and Maisy and Blue now reign supreme in my household.

Ben Barros

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December 20, 2005 in Books | Permalink | Comments (0) | TrackBack (0)

Sprawl Discussion

Thanks much to Kurt Paulsen and Michael Lewyn for participating in last week's post on sprawl (here, here and here).  I hope to have some some similar discussions of other topics after the holidays.  If you have a topic you'd like to see, please let me know.

Ben Barros

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December 20, 2005 in Land Use | Permalink | Comments (0) | TrackBack (0)

Dagan on Property and the Public Domain

Hanoch Dagan (Tel Aviv University) has posted Property and the Public Domain on SSRN.  Here's the abstract:

Friends of the public domain are typically suspicious of property-talk. Property is perceived as the foe, epitomizing the threat of a shrinking public domain. I argue that this common view both misguided and unfortunate. It is misguided because the cleavage between property discourse and a thriving public domain is largely illusory: the form, the substance, and the history of property convey lessons that are rather helpful to the goal of revitalizing a rich and vibrant public domain. It is unfortunate because the concept of property has enormous rhetorical power in shaping people's expectations and therefore in the construction of what they deem normal, obvious, and thus clearly justified. For both reasons, friends of the public domain should embrace property, rather than fight it.

Ben Barros

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December 20, 2005 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Saturday, December 17, 2005

Weekly Top 10

Some changes this week as two articles by yours truly drop off as being too old to be "recent."  Fuled by a lot of positive discussion in the blogosphere, Richard Lazarus's article on Justice Scalia picked up almost 200 downloads last week and is shooting up the chart.  Lazarus also has a new article appearing at #10, and Economic Analysis of Law by A. Mitchell Polinsky and Steven Shavell is new to the chart at #6; here's the abstract:

This entry for the forthcoming The New Palgrave Dictionary of Economics (Second Edition) surveys the economic analysis of five primary fields of law: property law; liability for accidents; contract law; litigation; and public enforcement and criminal law. It also briefly considers some criticisms of the economic analysis of law.

1. (293)  How City Hall Causes Sprawl: A Case Study, Michael Lewyn (George Washington University Law School)

2. (252) How Overregulation Creates Sprawl (Even in a City without Zoning), Michael Lewyn (George Washington University Law School)

3. (237) The Measure of a Justice: Justice Scalia and the Faltering of the Property Rights Movement within the U.S. Supreme Court, Richard Lazarus (Georgetown University Law Center)

4. (221)  Suburban Sprawl, Jewish Law, and Jewish Values, Michael Lewyn (George Washington University Law School)

5. (204)  Sprawl, Growth Boundaries and the Rehnquist Court, Michael Lewyn (George Washington University Law School)

6. (161) Economic Analysis of Law, A. Mitchell Polinsky and Steven Shavell (Stanford Law School and Harvard Law School)

7. (138)  Information Asymmetries and the Rights to Exclude, Lior Strahilevitz (University of Chicago Law School)

8. (107)  Property Rights in Spectrum: Taking the Next Step, Dale Hatfield (University of Colorado at Boulder) and Phil Weiser (University of Colorado at Boulder - School of Law)

9. (82) The Fall and Rise of Functional Property, Francesco Parisi (George Mason School of Law)

10. (66) Human Nature, the Laws of Nature, and the Nature of Environmental Law, Richard James Lazarus (Georgetown University Law Center)

Ben Barros

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December 17, 2005 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, December 15, 2005

Recent Pennsylvania Tenancy By The Entirety Case

The Pennsylvania Supreme Court recently issued an opinion in Regions Mortgage Inc. v. Muthler, an interesting tenancy by the entirety case.  Susan and Joseph Muthler bought a home in 1999 in both of their names.  Their mortgage company unilaterally dropped Susan's name from the mortgage.  Joseph died shortly thereafter.  Susan called the mortgage company to try to get the mortgage changed to her name.  The mortgage company (big mistake) refused.  Susan spoke with an attorney, who informed her (correctly) that the home passed to Susan unencumbered on her husband's death and that she had no obligation to pay the mortgage.  The Pennsylvania Supreme Court held that the mortgage company's unilateral mistake in leaving Susan off the mortgage was not grounds for reformation, and Susan in fact now owns the property free and clear of the mortgage.  The case is a good illustration of why it is a supremely bad idea to issue a mortgage to only one joint tenant or tenant by the entirety.

Thanks to Jody for the pointer.

Ben Barros

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December 15, 2005 in Real Estate Transactions, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Update on Oregon's Measure 37

Todd Zywicki links to a (slightly over the top) update on the fallout from the judicial invalidation of Oregon's Measure 37.  Among other things, some Oregon voters are attempting to recall the judge who invalidated the ballot measure.  I recently linked to an interesting essay on Measure 37 and the sources of Oregon voters' discontent.

Ben Barros

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December 15, 2005 in Recent Cases, Takings | Permalink | Comments (1) | TrackBack (0)

Tuesday, December 13, 2005

Reynolds on Bruegmann on Sprawl

Glenn Reynolds has posted a review of Breugmann's book on sprawl.  I'd welcome additional comments, but many of the comments to this post would seem to apply here, as would much of the content of Kurt Paulsen and Michael Lewyn's discussion of sprawl here and here.

Hat tip:  Rick Garnett at PrawfsBlawg.

Ben Barros

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December 13, 2005 in Land Use, Recent Scholarship | Permalink | Comments (1) | TrackBack (0)

Monday, December 12, 2005

Sprawl Part II -- What Causes Sprawl, and What Can We Do About It?

This is the second of two posts featuring a discussion between Michael Lewyn and Kurt Paulsen on sprawl.  The first post focused on the definition of sprawl.  This post talks about the larger issues of what causes sprawl and what, if anything, we can do about it.  I had originally planned on breaking this down into a series of smaller posts, but because all of these issues are interrelated, I've decided to put everything in one long post.  As an aside, you can find links to four of Lewyn's articles on sprawl here.

As before, Lewyn and Paulsen wrote their entries without seeing what the other had to say.  Feel free to join the discussion in the comments, but please note that comments are held for approval, so there will be some delay in posting.

What creates sprawl and can we do anything about it?

Michael Lewyn:


Part of what makes sprawl a difficult public policy problem is that both kinds of sprawl discussed above ("how we develop" and "where we develop" is not just the result of one misguided policy (or of "the market", to use a common counterargument).  Much like other major public policy challenges, it is the result of a whole bunch of policies, and so you need to work a lot of levers to get it right: kind of like crime in the 2nd half of the 20th century, which seemed unmanageable at first but was brought partially under control because a variety of actors made a variety of changes.

1.  Where we develop

Causes of suburban development include:

a) highways that essentially subsidize (or at least encourage) long-distance commuting by making it faster and easier
b) zoning and parking regulations that, by reducing density, constrict supply of housing in older, already-developed areas and thus forces people to move further out in search of newer or affordable housing
c) FHA mortgage insurance (which generally supported suburban development only from the 1930s to 1960s, and thus helped send cities into a "death spiral" of decline which continued long after FHA policies changed)
d) public housing policies that packed public housing in cities for the poor, thus making cities less desirable places by concentrating poverty and related social ills in cities (This problem has at least partially been fixed by the HOPE VI program and Sec. 8 vouchers).
e) suburban zoning that kept out poor, thus keeping poor locked up in cities and making cities poorer and more undesirable
f) federal policies towards urban transit- both lack of support and unfunded mandates that canceled out federal support
g) state school assignment laws that force children to go to school in municipality in which they live- which means that city schools more socially/racially/economically diverse (and thus less attractive to middle-class parents) than suburban schools
h) school desegregation case law that exacerbated the effect of school assignment law, by providing that city schools had to desegregate (thus making city schools less attractive to white parents) but not suburban schools
i) artificial division of regions into city and suburb, thus causing city to be stuck with weaker tax base, poverty-packed schools, etc.

2.  How we develop (or, given that people are going to move to suburbs why
are those suburbs so sprawling?)

a) zoning laws that keep housing away from jobs and offices, thus making it harder to walk to work or shops
b) zoning laws that artificially reduce density, thus keeping residential zones far from business zones
c) setback and minimum parking requirements that effectively require businesses and apartment buildings to be surrounded by parking (perhaps more parking than market would support, though this is empirical issue that is not fully researched), thus reducing residential density and making walking less comfortable
d) wide streets that make walking uncomfortable and reduce density
e) long blocks that reduce pedestrians' ability to cross street
f) minimum parking requirements make parking free, thus acting as fertility drugs for cars
g) cul-de-sac street design (often required by cities or FHA, though not always) which makes walking within residential neighborhoods difficult

D. Solutions

If you are in a hole, stop digging.  By and large, the solutions to the abovementioned policies are to stop the policies.  (Some of the policies, of course, have been stopped long ago- which may explain why some central cities are beginning to recover from the ravages of sprawl).  But here's a list:

1.  Where we develop

a) Highway spending should be examined for its "sprawl impact."  That means no more city-to-suburb highways (and perhaps even tear down a few that we have), no suburb-to-suburb highways in undeveloped or barely-developed parts of suburbia.
b) Transit spending doesn't really reduce this type of sprawl, but does mitigate its impact upon people without cars.  So transit spending is often desirable (subject to cost-benefit constraints), and removing unfunded mandates on transit is desirable.
c) Housing Opportunity Zones- Zoning should be radically restricted, if not abolished, in central cities.  Anyone should be able to build anything, anywhere, as long as it is (1) residential and (2) in the regional core (defined broadly but not too broadly- certainly anywhere in the city if the city has less than 100 square miles or so).
d) Some kind of reform of exclusionary zoning (though the line between "reducing exclusionary zoning" and "unfettered suburban development" is a blurry one.  I think it is at least arguable that abolishing zoning and similar restrictions everywhere would do more good than harm by encouraging infill- but the question is an empricial one and there is no way of knowing for sure that this is the case).
e) Possibly urban growth boundaries in some regions- depends on effect on housing costs and on whether combined with liberalization of central city land use regulation.  Some UGBs appear to have had a positive effect on sprawl (most notably Portland), others less so.   Obviously there is a tension between (c), (d) and (e), reflecting the broader tension between discouraging suburban development and encouraging urban development.  I prefer the latter, but have put the former of my menu of options because (i) not everyone's instincts are as libertarian as mine and (ii) the former might occasionally do more good than harm.
f) Break the link between residence and schooling in central cities, either through some kind of voucher system accessible to middle-class families OR through radically expanded use of "exam schools" (schools which, by screening out low achievers, draw middle-class families back into schools even in otherwise depressed school systems- City Honors in Buffalo, Boston Latin in Boston, etc.).  I think equalizing school finance is of no value in sprawl control; plenty of central-city systems spend as much or more than
suburban school systems.  (School finance equalization may be worth doing for reasons unrelated to sprawl- e.g., if it marginally improves performance of low achievers.  But the low achievers helped by such a system are typically from low-income households and thus are a "captive audience" who live in the city because they cannot afford to live elsewhere).
g) Regional government or tax base sharing
h) Obviously, improved city government has a marginal positive effect- but we won't necessarily agree on what "improvement" means.  Also, I think we should admit that effect of city government is MARGINAL.  For example, NYC gained population (9 percent increase) in 1990s when Giuliani "cleaned up the city"- but also gained population in 1980s (3 percent increase) when city less well run.  Even a Giuliani means a difference between a status quo city and a modestly improving city, NOT the difference between a status quo City and a St. Louis or a Detroit.  Mayor Giuliani trapped in Detroit would have been like Johnny Unitas playing football with 10 high-school students on his team.

2.  How we develop-

a) Deregulate, deregulate, deregulate.  Abolish all regulations discussed above.
b) Cities could experiment with zoning that mandates more pedestrian-friendly development (e.g. maximum setbacks instead of minimum, maximum parking requirements instead of minimum).  But command-and-control regulatory approaches run risk of increasing cost of doing business and driving out capital, and so municipalities need to be pretty careful about this sort of thing.

E.  Municipal control vs. regional control

Because sprawl is caused by a large number of factors, some of them can be cured or mitigated without reforms related to land use or regionalism, others need regional support, and in still others, regional or state or federal power has done more harm than good (e.g. school desegregation).  Obviously, the more of the above problems you work on, the less harm caused by sprawl.  But this is not an all-or-nothing problem that depends on one key reform to be "solved" or "not solved."

Kurt Paulsen:

Under standard urban economic models, the cost advantages of automobile travel permit lower-density development further from the city center.  In this sense, automobiles "cause" suburban development.  But does auto-dependence cause "excessive" suburbanization?  Not necessarily.  Automobile dependence may be partially caused by low-density, single-use development patterns, but it is just as likely that low-density single-use development patterns may result from the cost advantages of automobile ownership.  I don't think there is anything inherently wrong about dependence on automobiles, given consumer preferences and the tremendous benefits of automobiles – and, subject to the conditions that automobile travel pay its true social cost (see below) and that those excluded from automobile ownership have equally viable and equally available transportation options.   

Within the field of urban economics, the canonical model of urban spatial structure is the "monocentric" or Alonso-Mills-Muth (AMM) model.  To oversimplify:  this model describes a situation where employment is concentrated in a city center (Central Business District or CBD).  Land values (and hence, the density or intensity of land use) decline in a predictable fashion with distance from the CBD.  Different land use types (offices, industries, commercial, residential, etc.) each have "bid-rent" curves (how much rent they are willing to pay for proximity)  resulting from the nature of production or their preferences.  Different land uses have different demand for land vis a vis distance to the CBD.  This model is illustrated conceptually below.


The Alonso-Mills-Muth (AMM) model holds up reasonably well in empirical studies, even with its unrealistic assumption of centralized employment and a single-centered (monocentric) metropolitan region. 

There are two features of the real world to examine in defining "sprawl" by reference to this model.  The first feature is employment decentralization, sometimes disparagingly called "job sprawl."  Anyone who drives along highways notices that office-parks, warehouses, and manufacturing facilities have moved out to the suburbs and exurbs.  Two recent papers by Ed Glaeser document the declining percentage of jobs within metropolitan regions within close proximity to the CBD.  What caused this employment decentralization?  (or, technically, a "flattening" of the office and manufacturing bid-rent curve)  Glaeser demonstrates that declining transportation costs are a prime determinant.  Transportation cost advantages of centralized employment (e.g. access to ports or railroads) have been reduced by trucks and highways.  Businesses leave downtowns because the high land rents in the CBD are no longer cost-effective for them.  Further, one advantage of centralized employment with residential centralization was the availability of a skilled and abundant work-force in easy commuting distance.  If firms pay a worker her marginal productivity plus some compensation for the time and financial costs of commuting to the job, centralized employment and residences can reduce the wage bill of employers.  Employment decentralization, however, has followed residential decentralization. 

Generally, firm location will be based on proximity to its input markets including labor, land and raw materials and proximity to output markets.  Declining transportation costs to move both goods and people should lead naturally to employment decentralization within metropolitan regions.  Only those businesses for whom proximity to agglomerations of other businesses downtown (e.g. finance, investment, business services) provide a cost advantage are willing to pay the higher land rents downtown. 

Of course, this is not the only story.  Jobs in manufacturing and offices have not only left central-cities, but have also fled to southern states (because of anti-union laws and lax environmental regulations) and overseas. 

The second feature of the monocentric model to highlight is residential decentralization.  (Perhaps, if we are looking for the most neutral description of what most people mean by sprawl it would be "residential decentralization.")  The figure below indicates a standard looking residential density function.  In this figure, the density of residential development declines with distance to the city center.


Within the model, higher density development occurs closer to the CBD because of higher land rents, while lower density development occurs further away.  Higher land rents lead to higher densities, while lower land rents lead to lower densities.  If one believes that all lower-density suburban development is inherently bad, the real solution would be to increase land rents!

Households chose residential locations based on trade-offs between accessibility, amenities, and house/land size.  If one lives further away from the city, one can afford a bigger house and more yard, but a longer commute.  If one lives closer, one might be closer to employment and cultural amenities, but the unit-cost of housing is more expensive and houses are smaller.  Households make these trade-offs and the choices of commuting time based on demographics, preferences and income. 

All other things being equal, the model predicts that increases in population in a metropolitan region will cause an expansion of metropolitan size (total area of developed land).  New entrants into a city can be accommodated by either growing up (increased densities) or growing out (new fringe development).  All other things being equal, the model also predicts that increases in household income will lead to a "flattening" of the density gradient and increased suburban development at the fringe, because the demand for land and house is income elastic.  As income increases, people demand more.  This is one of the first questions I ask my land-use planning students when they complain about sprawl: "What is the income elasticity of demand for land and house size?"

All other things being equal, the model also predicts that decreases in commuting costs will expand a metropolitan area's size, as people can afford to live further out and consume more house and land for the same level of utility.  Lastly, all other things being equal, increased land prices on the metropolitan fringe – from agricultural rents -- should restrict outward expansion of metropolitan areas.

Thus, the predictions of the model (which have held up remarkably well in empirical research) are: increases in population, increases in income, decreases in commuting costs, and decreases in agricultural rents should lead to employment and residential decentralization and lower-density development at the metropolitan fringe. 

It is in this context that one can define suburbanization as "natural."  As pointed out in Rybczynski's review of Bruegmann's book, suburbanization is a natural feature of metropolitan regions almost everywhere and at almost every time.  Increases in population, or increases in income, or declines in commuting costs lead to greater residential decentralization at lower densities.  It is as true of Paris as it is of Atlanta.  The issue, of course, is whether this suburbanization is "excessive."  Suburbanization, in and of itself, is not "sprawl" nor is it in and of itself  necessarily evil. 

The United States in the post-war period has sustained increases in population, increases in income and declines in commuting costs?  Voila: metropolitan spatial expansion at lower densities.  Quod erat demonstrandum.

(One surprising result when I present this lecture to my students has been recent number of students who will thus argue that population control and immigration restrictions are necessary to stop "sprawl".  Interestingly, if one Googles the term "sprawl", the first website listed is  which makes the same claim.  I don't have time here to refute this argument, but I do wish to repudiate it with all the vehemence with which I am capable.)

Aha -- not so fast.  Within the urban economics paradigm, the implicit assumption is that this monocentric model (or its poly-centric cousins) represents something like the "free market." However, within urban transportation and urban land use, there really is no such thing as a free market.  Governments intervene in and regulate urban transportation and  land markets by necessity.  Imagining an unregulated, free market in urban land and transportation is merely an academic exercise. 

Let's return to the transportation cost argument.  What caused the decline in transportation costs, particularly for automobiles and trucks?  While some reduction might be attributable to better automobile technology, most of it is attributable to government investment in highways.  While it is true to say that suburbanization has occurred in every country, suburbanization is more auto-oriented in America because of more investment in infrastructure to support private automobiles relative to public transportation.  The outward expansion of urban areas facilitated by declining transportation costs are due to government investment in highway infrastructure.  Thus, while some might conclude that "highways cause sprawl," it is more precise to say that "highways facilitate suburbanization."

Within a "market" paradigm, urban development and urban transportation are subject to a wide range of "market failures."  Jan Brueckner points out 3 major market failures which may lead to "excessive" spatial expansion of metropolitan areas.  First, there is a failure to account for the social value of open space.  Open space, natural lands, agricultural vistas, scenic beauty, protected wildlife habitat, etc. all have a value to society and future generations.  Because this value is not usually expressed in a private land prices, development at the urban fringe appears artificially cheap.  The solution to this is simple: a land development tax, the proceeds of which are used for land preservation, parks and open space and the like.  This is somewhat happening around the country: hundreds of municipalities, counties and many states have seen overwhelming voter approval to raise taxes in order to purchase open space.  Of course, as any land use planner knows: why actually pay to preserve land when you can simply down-zone it?!

The second market failure is the failure to account for the infrastructure costs of new development.  To the extent that new development fails to "pay its own way" in community infrastructure (water, sewer, roads, schools, etc), it appears artificially cheap.  Again, a solution seems to have been recognized in many places around the country: development impact fees (or concurrency requirements or adequate public facilities requirements). 

The third market failure is the failure to account for the social costs of traffic congestion.  I would expand on Brueckner's formulation to include the failure to account for the social costs of automobile travel generally.  Let's face it: people drive too much, and they drive too much at the wrong times of the day on the wrong roads.  People do this because the marginal cost is below the true social cost.  The true social cost of driving includes the infrastructure costs of roads (including maintenance, repairs and law enforcement), air pollution, and congestion.  Congestion occurs because each driver imposes a minimal congestion cost on everybody else who is driving on the same road at the same time.  Every driver knows the problem with congestion: too many other cars on the road when I want to get to work!

The solution to excessive driving is obvious to any economist, yet not so obvious to any politician: user charges, gas taxes and congestion tolls.  User charges per mile of road should pay for acquisition of rights-of-way, construction, maintenance, repair, enforcement, etc.  The charge should be per-mile, but could be proxied in a gasoline tax.  Proper gasoline taxes should encourage less driving and more fuel-efficient, lower-polluting cars.  Congestion tolls should vary with the time of day and the roads chosen.  Every day I drive, an electronic sensor takes money from my credit card and sends it to the Pennsylvania Turnpike.  Adjusting electronic tolls for congestion is technologically simple, yet politically unrealistic. 

If the social cost of automobile travel is not fully borne by each traveler, it is artificially cheap and people drive too much.  And, because transportation costs are a significant component of metropolitan spatial expansion, metropolitan expansion must therefore be excessive.  The spatial expansion of developed land is excessive because open space conversion is artificially cheap, infrastructure is inadequately priced, and private automobile travel is artificially cheap.  If we had the political capacity to address these issues, we might make some headway in curbing the excesses of spatial expansion.  If our main concern in "sprawl" is land consumptive low-density, auto-dependent development, we should certainly stop subsidizing "sprawl."  Ok, where is the courageous politician to propose development taxes, higher gasoline taxes and elimination of the mortgage interest deduction?   

There is far more to sprawl than market failures and the natural expansion of metropolitan areas.  Cities have been losing populations also due to irrational fears.  Fear of crime and fear of racial integration have certainly led many whites to flee central cities and establish bastions of exclusion and privilege in the suburbs.  Let's not kid ourselves that "sprawl" in the United States is natural.  White flight and racism have played significant roles in sprawl, to our great shame.   

There are also policy and planning failures.  One policy frequently mentioned as contributing to sprawl is the federal tax treatment of mortgage interest paid.  Richard Voith in a series of papers has demonstrated that the mortgage interest tax deduction reduces the operating costs of homeownership by approximately 15 percent per year.  Because demand for land and house is income elastic, this subsidy allows people to consume more housing than they otherwise would.  This demand stimulus should make metropolitan spatial areas excessive.

However, the real planning and policy failure causing sprawl is zoning.  Consider the simple model posited above.  The model ignores politics.  Yet, every metropolitan region in this country contains large number of general purpose local governments with land use regulation powers.  Land use regulation (of which zoning is the 900 pound gorilla) is almost completely a local affair.  The fragmentation of metropolitan regions into hundreds of autonomous local governments with zoning power surely complicates the story above.

Consider the figure below.  Again, we see the familiar declining density gradient.  But, in this case, I have illustrated the location of a hypothetical "Upper Snobville Township."  In the pure market model above, the density within this municipality might be 8 housing units to the acre in the portion of the town closer to the CBD, and 6 units to the acre in further out portions of the township.


In this illustration, the dark line represents the "market" density, and the dashed line represents the maximum permissible zoning under the Upper Snobville Township ordinance.  Saying that "zoning causes sprawl" is like saying that overeating causes obesity.  It is true, but not particularly interesting.  The real question is what "causes" zoning?  How does zoning arise?  Well, the current residents of Upper Snobville, the homeowners who are voters (the "Home-voters" to use William Fischel's term) certainly do NOT want 8 units to the acre in their community.  Why?  First, by artificially reducing development densities, they create a "scarcity effect" within their community.  Second, by reducing density, they create an "amenity effect."  Third, by increasing minimum lot sizes, they make sure that their neighbors are of a higher income class.  Fourth, by reducing the total number of housing units, they reduce the total numbers of school kids, thereby reducing fiscal burdens.  The "Home-voters" who control municipal zoning thereby use zoning to protect their property values and confer upon themselves a nice capital gain. 

Upper Snobville's neighbors are no fools: their home-voters utilize the zoning powers as well.  On and on it goes.  The result?  To paraphrase William Fischel: the American way of zoning causes metropolitan areas to be too spread out.  Each municipality zones for less density than would occur under the "market" and the result pushes housing demand further away from the center at lower densities.

This is exclusionary zoning.  It need not been merely aimed at keeping out the poor and racial minorities (although it often is).  I consider it exclusionary zoning when a municipality significantly reduces development densities below what might occur within a market framework.  The net effect of exclusionary zoning is excessive spatial expansion at low densities. 

The other effect of exclusionary zoning is the observed pattern of residential segregation by race and class.  Because where one lives determines access to a wide range of public goods and access to jobs, the result is an unequal – and unjust – geography of opportunity.  This, to me, is the great evil of the current pattern of low-density, exclusionary zoning and the real reason why "sprawl" is bad. 

What is the solution to exclusionary zoning, residential segregation and its attendant lower-density, fragmented land use pattern?  It depends on what one sees as the motivation behind exclusionary zoning.  William Fischel has written extensively on this issue, and has proposed something like "House Value" insurance.  The idea is simple: if home-voters (for whom the value of their home is their prime asset) no longer feared reductions in property values associated with more dense development, they would have less motivation for exclusionary zoning. 

I am less optimistic about this solution.  I prefer to think of it like this:  if there is too much of a bad thing, we can tax it to get less of it and use the revenues to mitigate  the negative effects.  I would propose something that would function like an "exclusion tax"  or an "inclusion bonus." Municipalities which did not permit adequate densities would have to pay.  Or, municipalities would be incentivized to allow higher densities in that they would receive compensation from the state.  I know that, in practice, implementing an exclusion tax would be politically difficult.  One partial proxy for my idea has been New Jersey's system of mandated fair-share affordable housing where municipalities can trade away half of their fair-share obligations for payments to other municipalities.  In practice, suburban municipalities "sell" their affordable housing obligations to urban municipalities.  If we can create markets in pollution tradable permits, why not exclusion tradable permits?  Municipalities would be allocated their fair share of both affordable housing and overall development density.  They could either accommodate such allocations in their zoning, or they could "sell" their obligations to other municipalities.  Presumably, urban municipalities, which already have density and affordable housing, would receive payments to obviate suburbs of these requirements.   Properly structured, this market could elicit a suburban jurisdictions' true willingness-to-pay-to-exclude.  Suburban jurisdictions would either have to pay to exclude or accept higher density development. 

I am not naïve.  I know that forcing people to live in integrated (both racially and socio-economically) neighborhoods would be resisted.   However, as a practical matter we need to structure the entire system of public finance so as to 1) NOT subsidize low-density, exclusionary suburban development, and 2) incentivize higher-density, mixed-use, integrated development.  I realize this might never happen, but one can dream!

As a more practical solution to "sprawl," I am in sympathy with proposals by William Fischel and Jonathan Levine who have argued for what I call "market solutions to planning failures."  This would involve restoring to owners of undeveloped lands their development rights: Let developers and real-estate markets build the higher-density, mixed use developments they can profitably build without the arbitrary interference of exclusionary-minded suburban zoning!  What could be more American and more "pro-property rights" than that!!

Some critics of urban planning would have people believe that the natural market outcome is low-density, single-use, auto-dependent development.  After all, isn’t that what everyone really wants?   Really?  How about putting that to the test by letting developers build higher-density, mixed use developments (which they would) and see if the market will bear them out. 

We will never stop metropolitan spatial expansion.  Americans have a love for single-family, detached, owner-occupied housing and for automobiles.  We also claim to like fragmented local governments and protections of private property. 

People should be free to live wherever they want and be free to live according to their preferences for the type and quality of life they consider worthwhile.  However, this freedom MUST be consistent with paying their true social cost for those choices and consistent with maximizing the ability of everyone else to live according to their preferences for a high quality life.  To me, the issues involved in the sprawl debate are primarily about justice. 

Let me conclude and summarize with some of the questions posed for this discussion.  What is sprawl?  "Sprawl" is excessive, exclusionary suburbanization.  Is "sprawl" bad?  So defined, yes.  Why?  Because it is overly land consumptive and therefore environmentally destructive, and because it unjustly creates segregation by race and class and an unequal geography of opportunity.  What causes sprawl?  Among others, exclusionary zoning.  Can we do anything about it?  Yes!  Are we likely to? No. 

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December 12, 2005 in Land Use | Permalink | Comments (5) | TrackBack (0)

Sprawl Part I: What is Sprawl, and Why is it Bad?

Inspired by a chain of comments on a post that I made a few weeks ago, I asked Michael Lewyn (George Washington Law School) and Kurt Paulsen (Temple University Urban Planning) if they would be willing to participate in an on-line discussion of sprawl, its causes, and its potential cures.  When both graciously agreed, I posed the following questions to them:  (1) What exactly is sprawl, and why is it bad?  Put another way, how can you distinguish between sprawl (bad) and growth (maybe bad, maybe good)? (2) What creates sprawl? (3) Can we do anything about it?  Below I’ve posted their response to the first question.  Their lengthier responses to the other questions are here.  Both Lewyn and Paulsen provided their responses without seeing the other’s response.  My hope is that they will continue the discussion in the comments, joined by anyone else who wants to participate.  Please note:  Because this site uses moderated comments, all comments are held for my approval.  So there will be some delay before your comment is posted.

Ben Barros

What exactly is sprawl, and why is it bad?  Put another way, how can you distinguish between sprawl (bad) and growth (maybe bad, maybe good)?

Michael Lewyn:

Sprawl is a term commonly used to describe one or both of the following phenomena:

1) Development far beyond a region's historic core- in other words, WHERE we develop.

This type of sprawl is NOT growth.  Growth is an increase in the number of people in a place. Sprawl is just the redistribution of those people from one place to another.  In most of the Sun Belt, you have sprawl AND growth. But in Buffalo or St. Louis, you have sprawl WITHOUT growth.

2) Development that is extremely automobile-oriented (usually due to street patterns and/or design that discourage walking, very low density, etc.)- in other words, HOW we develop.

Sometimes people use the term "sprawl" to describe (1) only (as in "The vitality of our older neighborhoods is being threatened by sprawl.")

Sometimes people use the term to describe (2) only (as in "Downtown Bethesda is very nice, but once you get north of X Avenue, its just pure sprawl out there.")

Often, (1) and (2) go together.

In my humble opinion, the most serious problems arising from sprawl are as follows.

First, people too old/young/poor/disabled for the dominant auto-oriented lifestyle are shut out of economic and civic life.   Even in our auto-oriented society, 1/3 of Americans don't have a drivers' license due to youth or disability, and some unknown number of the other 2/3 can't exactly drive due to poverty, disability, etc.  Freezing these people out of the mainstream of American life is just not right, and leads to wasted lives that generally reduce social welfare.

Second, sprawl eliminates individual choice as to the people who can drive.  If Oklahoma passed a law saying "every human being physically capable of doing so has to spend $X,000 on a car to get a job or live in neighborhood X or go to school X" we would, I think, all recognize that law as a serious imposition on individual freedom.  To reach the same result through dozens of seemingly unrelated laws is equally despotic.  (And as a subset of this, I think my personal quality of life is worse in places where I am subject to this "law.")

There are also a variety of environmental arguments against sprawl (relating to air and water pollution, traffic congestion, global warming, etc.).  I think these arguments are less compelling because they involve difficult scientific judgments.  For example, I don't think I am qualified to have an informed opinion about (a) the seriousness of global warming or (b) whether a less "sprawling" American lifestyle would reduce pollution enough to make global warming less serious.

Kurt Paulsen:

First, a disclaimer:  much of what I have to say in this and following posts summarizes  the work of people far more intelligent than I.  Without implicating them in my errors, I borrow ideas from:  Jan Brueckner, William Fischel, George Galster, Ed Glaeser, Mark Alan Hughes, Jonathan Levine, Stephen Malpezzi, and Richard Voith.

A survey of all Americans regarding land use would probably reveal the following  results.  There are two types of land use patterns which nobody likes: one is called "sprawl" and the other is "density".

There has been a flurry of academic activity of late to define and measure "sprawl."  The reason "sprawl" is such a popular term is that everyone can make it mean whatever they want it to mean.  We all agree that, since "sprawl" is a pejorative term, sprawl is bad.  But, you see, what we have here (as opposed to over there) isn't sprawl.  I am not the first to make the connection, but it bears repeating that "sprawl" as a term is like the famous definition of pornography – one can't define it, but one knows it when one sees it. 

As an academic, I avoid the term sprawl because of its plasticity, lack of specific definition, and non-neutrality.  The best definition I have seen of sprawl comes from Prof. Jan Brueckner at the University of Illinois, defining sprawl as "excessive spatial growth of cities."  This definition, of course, begs further elaboration as to the nature of suburbanization and when it becomes "excessive."

Many definitions conflate cause, effect and characteristics of sprawl.  For example, one of the most common definitions of sprawl within my field (urban and regional planning) is low-density, auto-dependent, fragmented land use patterns (including "leap-frog", commercial strip, and single use zoning).  This definition conflates cause and effect.  For example, is auto-dependence (or, more precisely, dependence on single-occupancy privately owned automobiles for journey-to-work trips) a cause of sprawl, a consequence of sprawl or simply a necessary characteristic of sprawl?  One of the hottest topics in urban planning research is the land use-transportation connection, which attempts to answer the question: what is the effect of urban form (land use patterns) on travel behavior?  It is fair to say that we are not even close to a consensus answer.  I therefore prefer to leave the question of auto-dependence aside in definitions of sprawl, and focus on sprawl as a characteristic of land use patterns.

Defined as excessive, exclusionary suburbanization, sprawl is bad because it is overly land consumptive and therefore environmentally destructive.  The numerous environmental consequences of "sprawl" include habitat fragmentation, forest fragmentation, soil erosion, water quality, water quantity, stormwater runoff, increased impervious surface, and the like.  Sprawl is also bad because it unjustly creates segregation by race and class and an unequal geography of opportunity.

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December 12, 2005 in Land Use | Permalink | Comments (3) | TrackBack (0)

More on State Takings of IP

Further to my post last week regarding Will Baude's interesting questions on whether a state can take patents and other intellectual property, Mark Janis and Bill Hines at Iowa Law pointed me to Matthew S. Bethards's article Condemning a Patent:  Taking Intellectual Property By Eminent Domain, 32 AIPLA Q.J. 81(2004).  Bethards raises some interesting issues about state power to take federally created IP, among them the possibility that such a taking would be invalid based on Commerce Clause grounds:

A state's attempt to take a patent by eminent domain would likely run afoul of the commerce clause by impermissibly burdening interstate commerce. Interestingly, the violation of the commerce clause is what finally prevented the City of Oakland from acquiring the Raiders. The use of eminent domain will not violate the commerce clause if interstate commerce is only incidentally and indirectly burdened.

Under one view, making this determination requires a state or local government to show that eminent domain is the least burdensome alternative to achieve legitimate local public interests. The court purportedly applied this test in denying the City of Oakland's attempt to condemn the Raiders. Another view of the commerce clause is labeled as "anti-protectionist" because it considers local regulations that favor or protect instate businesses illegitimate and unconstitutional. Under this theory, the City of Oakland may have prevailed because it made no attempt to take away business from another state or improve local competitive conditions. The standard would still preclude the condemnation of an entire patent because such condemnation has significant interstate effects. Nevertheless, the taking of a patent license might pass muster under the anti-protectionist view.

Bethards also discusses the issue of whether a state would be immune from a patent infringement lawsuit:

In 1992, Congress attempted to eliminate state and local governments' patent infringement immunity through the Patent and Plant Variety Protection Remedy Clarification Act(hereinafter Patent Remedy Act). However, in 1999, the U.S. Supreme Court ruled the Patent Remedy Act unconstitutional under the Eleventh Amendment.  In that case,the patentee invented a financing methodology that a Florida state-created entity allegedly infringed. The state of Florida never consented to suit for patent infringement. The Court noted that "[t]he underlying conduct at issue here is state infringement of patents and the use of sovereign immunity to deny patent owners compensation for the invasion of their property rights." The patentee argued that this state action constituted a taking of property compensable under the Fifth Amendment, but the Supreme Court refused to consider the argument because neither the statute nor its legislative history indicated that Congress contemplated the Fifth Amendment's just compensation clause when enacting the Patent Remedy Act. Rather, the Court invalidated the statute because Congress exceeded its power to enforce the guarantees of the Fourteenth Amendment's due process clause by not showing a pattern of consistent infringement by the states.

Nevertheless, if a state infringes a patent, the patentee is not without a remedy. It has been suggested that state claims of conversion, unfair competition, or waiver would be effective. However, similar to a patentee's remedy against the federal government taking a patent license in the Court of Federal Claims, a takings claim for payment of just compensation in state court would be the most effective.

Ben Barros

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December 12, 2005 in Takings | Permalink | Comments (0) | TrackBack (0)

Sunday, December 11, 2005

WaPo on Mortgage Sales Practices

Today's Washington Post has an article on a potential regulatory response to option mortgages and related products.  Some highlights:

Federal financial regulators appear to be on the verge of reining in one of the most popular mortgages in hot housing markets nationwide -- loans that allow 1 percent to 2 percent payment rates leading to "negative amortization."

In a speech last week to the Consumer Federation of America, Comptroller of the Currency John C. Dugan hinted strongly that banks and their mortgage subsidiaries can expect significantly toughened rules for 2006 governing "payment-option" home loans. Payment-option mortgages have accounted for about a third of all new home loans originated by some major lenders this year. They are especially popular in high-price, high-appreciation markets on the west and east coasts because their low payments permit buyers to purchase costly properties they would otherwise be unable to afford. . . .

"Is this an appropriate product to mass-market to customers who may be looking at the less than fully amortizing minimum payment as the only way to afford a large mortgage?" Dugan said.

His clear implication was no -- a conclusion with huge potential significance for the real estate market. Dugan's office heads the Treasury Department's main regulatory oversight unit for national banks and their mortgage subsidiaries.

Related posts are here and here.

Ben Barros

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December 11, 2005 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Saturday, December 10, 2005

Singer on the Ownership Society

Joseph Singer (Harvard Law School) has posted The Ownership Society & Regulatory Takings: Castles, Investments, & Just Obligations on SSRN.  Here's the abstract:

Regulatory takings law has hit a crossroads with new decisions in Palazzolo, Tahoe-Sierra, Lingle and Kelo. This article approaches the topic by identifying three different images or models of property that may lie behind analysis of the rights of property owners in the face of the takings clause. Each of the models suggests a central question. The first two models are castles and investments. The castle model focuses on the question of what it means for an owner to act within the borders of her property (or within the scope of her property rights) while the investment model focuses instead on protecting the justified expectations of investors. The third model of ownership developed briefly in this article starts from the assumption that owners have obligations as well as rights and asks whether the obligation imposed by a new regulatory law is just. The image behind this model is that of a citizen in a free and democratic society. Although the Supreme Court has adopted this model as the ultimate test for takings, we have not sufficiently appreciated how it modifies the other models, coexists with them, and provides normative weight in applying the takings clause. This article uses the fact situations in Lucas and Kelo to illustrate and play out the implications of the three models.

Singer presented this very interesting paper at the GELPI Takings Conference, and I've been meaning to post on it for a while.  Now that it is on SSRN, you can check it out directly.

Ben Barros

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December 10, 2005 in Recent Scholarship, Takings | Permalink | Comments (0) | TrackBack (0)

Friday, December 9, 2005

Berger on Pierson v. Post

Bethany Berger (Wayne State University Law School) has posted It's Not About the Fox: The Untold History of Pierson v. Post on SSRN.  Here's the abstract:

For generations, Pierson v. Post, the famous fox case, has introduced students to the study of property law. Two hundred years after the case was decided, this Article examines the history of the case to show both how it fits into the American ideology of property, and how the facts behind the dispute challenge that ideology. Pierson is a canonical case because it replicates a central myth of American property law, that we start with a world in which no one has rights to anything and the fundamental problem is how best to convert it to absolute individual ownership. The history behind the dispute, however, suggests that the heart of the conflict was a contest over which community would control the shared resources of the town and how those resources would be used. The historical record is far from complete, so I offer my conclusions tentatively. But this is what I believe it shows. Pierson was among the "proprietors", those who had inherited from the town's original settlers special rights in the undivided lands where the fox was caught. The fox hunt occurred in the midst of a growing dispute over whether the proprietors or the town residents as a whole had rights in these common lands. Although Post does not appear to have had proprietors' rights, his father had become wealthy in the West India trade after the war, and the family flaunted this wealth from commerce. Post's elaborate fox hunt over the commons would have been perceived as another display of conspicuous wealth, inimical to the town's agricultural traditions. The Piersons, in contrast, descended from a long line of educated gentleman farmers and town leaders, and would have followed the town's traditions of puritan thrift. Pierson and Post's conflict over the fox, I believe, was not really about the fox, but was instead part of this growing conflict over who could regulate and use the common resources of the town, and over whether agricultural traditions or commerce and wealth would define its social organization.

Ben Barros

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December 9, 2005 in Recent Scholarship | Permalink | Comments (1) | TrackBack (0)

Weekly Top Ten

Here's this week's list of SSRN's top downloads of recent property scholarship:

1. (291)  How City Hall Causes Sprawl: A Case Study, Michael Lewyn (George Washington University Law School)

2. (242) How Overregulation Creates Sprawl (Even in a City without Zoning), Michael Lewyn (George Washington University Law School)

3. (220)  Suburban Sprawl, Jewish Law, and Jewish Values, Michael Lewyn (George Washington University Law School)

4. (203)  Sprawl, Growth Boundaries and the Rehnquist Court, Michael Lewyn (George Washington University Law School)

5. (124)  Information Asymmetries and the Rights to Exclude, Lior Strahilevitz (University of Chicago Law School)

6. (117)  Home as a Legal Concept, Benjamin Barros (Widener University - School of Law)

7. (105)  Property Rights in Spectrum: Taking the Next Step, Dale Hatfield (University of Colorado at Boulder) and Phil Weiser (University of Colorado at Boulder - School of Law)

8. (79)  Testimony Before Pennsylvania House of Representatives State Government Committee Re: Eminent Domain, Benjamin Barros (Widener University - School of Law)

9. (75) The Fall and Rise of Functional Property, Francesco Parisi (George Mason School of Law)

10. (61) The Measure of a Justice: Justice Scalia and the Faltering of the Property Rights Movement within the U.S. Supreme Court, Richard Lazarus (Georgetown University Law Center)

Ben Barros

December 9, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Thursday, December 8, 2005

Takings and IP

Ted Frank at Point of Law and Will Baude at PrawfsBlawg both have posts up on takings of intellectual property.  I have to say that I don't really see Frank's connection between Kelo and MercExchange -- the former involves government use of eminent domain to take property to transfer it to another private party, while the later involves court adjudication of the relative rights of two parties with respect to a property right created by statute.  Kelo seems more relevant to another fact pattern that has sparked some discussion lately -- the government taking of patents on drugs like Cipro and Tamiflu to allow other manufacturers to manufacture the drug in question.  Even here, though, eminent domain might not be that relevant.  28 U.S.C. s 1498 provides that:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.

This provision seems to authorize the government to allow other manufacturers to produce a patented product so long as compensation is paid to the patent holder.  While this looks a lot like eminent domain, I view it as more of a statutory limit on a statutorily created property right, so I don't think the Constitutional public use issue is relevant in the patent takings context.  I'd also think that this provision would preempt the type of state taking of a patent described by Baude in his post.

UPDATE:  If you have a view on whether state power to take patents would be preempted, please leave a comment.

Ben Barros

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December 8, 2005 in Takings | Permalink | Comments (4) | TrackBack (0)

Wednesday, December 7, 2005

Sandefur on Post-Kelo Backlash

Timothy Sandefur (Pacific Legal Foundation) has posted The “Backlash” So Far: Will Citizens Get Meaningful Eminent Domain Reform? on SSRN.  Here's the abstract:

The Supreme Court’s decision in the eminent domain case of Kelo v. New London was greeted with anger and frustration. The public outcry reaction came to be called the “Kelo backlash,” and news reports and editorials declared throughout the fall of 2005 that this backlash was leading to statutory reforms in many state legislatures. Following Justice Stevens’ suggestion in the Kelo opinion that states could provide greater protection for property owners than the federal courts provided, and recognizing that some state courts had imposed stricter limits on eminent domain through the “public use” requirements in state constitutions, activists and legislators in 38 states began working on changing state laws regarding property seizure.

So far, the backlash has produced few results. Largely because most state legislatures have been in recess since shortly after the Kelo decision was announced, only four states have passed legislation regarding eminent domain. Unfortunately, those four provide little protection for property owners. Proposals in other states, including two brought forward in the California Legislature, even appear to have been consciously designed to effect no meaningful change. On the other hand, a bill recently passed by the Pennsylvania House of Representatives and now pending before the state Senate, as well as federal legislation which appears likely to be enacted into law, do include significant limits on eminent domain. These bills give reason to hope that meaningful reform is on the horizon once other state legislatures return from winter recess. But proponents of these measures must resist the pressure to include loopholes and exceptions that have so severely weakened the four new reform laws
In this article, I survey these four new laws, as well as three proposals that were shot down by the legislature of California, to see how they promise far more than they actually deliver. I will also examine bills recently passed by the Pennsylvania Legislature, and by the United States House of Representatives, which, if enacted, would provide genuine protection for property owners. After a brief background on the law of eminent domain after Kelo, and the public reactions to that decision, I explore each bill in sequence. I then conclude with some observations as to the two biggest obstacles faced by those hoping for serious eminent domain reform: the political influence of powerful redevelopment proponents, and the lack of serious philosophical support for opposition to the outcome of Kelo.

There is some discussion of Sandefur's argument at both the Volokh Conspiracy and BizzyBlog, though the comments at the VC suggest that there was some initial misunderstanding of Sandefur's key points, which were first made in a post on Positive Liberty.

Those interested in the subject might also be interested in these other posts:  Is Justice Stevens a Vulcan?; A Tale of Two Blight Statutes; Resources on the Legislative Response to Kelo; and my posts on the Berman v. Parker and Hawaii Housing Authority v. Midkiff conference notes.

UPDATE:  Todd Zywicki has more on related topics here and here.

Ben Barros

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December 7, 2005 in Recent Scholarship, Takings | Permalink | Comments (3) | TrackBack (0)

Monday, December 5, 2005

Real Estate Transaction Fraud

The LA Times has an interesting story about various types of real estate transaction fraud, including this one involving mortgage brokers:

In another, more wide-ranging scheme that has only partially come to light, homeowners were not victims but eager participants. This hustle, which allegedly was orchestrated by a California broker, is said to have involved hundreds of people. It illustrates just how easy it is to break the mortgage rules on a large scale, and how minimal the punishment can be if you do.

The scheme worked like this, according to the lender that issued the broker's loans: The broker put his clients in loans in which they paid a higher-than-normal interest rate in return for negligible closing costs. These loans generate so much money for lenders that they pay brokers a big finder's fee for them.

To keep the homeowners quiet, the broker split the loot with them. Many of the participating homeowners liked the deal so much they allowed the broker to keep refinancing their loans every few months. Each time, the broker received a new finder's fee and the homeowners earned enough cash to pay their mortgages for a month or two.

The scheme violated California regulations against deception by brokers. But here's what happened when the broker's deceit was finally discovered: nothing. In fact, California regulators say they never heard of the case.

Thanks to Kurt Paulsen for the pointer.

Ben Barros

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December 5, 2005 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)