PropertyProf Blog

Should the Federal Government Give More Money to Troubled Cities?

Steve Clowney

Kahng on Tax Subsidies for Homeownership

Lily Kahng (Seattle) has posted Path Dependence in Tax Subsidies for Home Sales (Alabama Law Review) on SSRN.  Here's the abstract:

At a time of looming fiscal crisis and virtual unanimity that tax expenditures must be curtailed, tax subsidies for homeownership stand out as among the most costly and unfair of these expenditures. As a result of tax subsidies for homeownership, the government foregoes billions of dollars in revenue each year, most of which benefits wealthy taxpayers. Moreover, subsidies for homeownership encourage overinvestment in housing and underinvestment in other business sectors, which impedes economic productivity, jobs creation and the ability of U.S. businesses to compete in the global marketplace.

Scholars and commentators have analyzed extensively the tax subsidy for home mortgage indebtedness but have paid little attention to tax subsidies for home sales. This Article is the first to undertake a comprehensive examination of tax subsidies relating to home sales. The central thesis of this Article is that these subsidies rest upon questionable policy justifications, flawed logical reasoning, and poor design choices. To support this thesis, the Article traces the evolution of tax subsidies for home sales from their surprising origins in a World War I-era tax preference for requisitioned ships to their present incarnation as a practically unlimited tax exemption. This narrative account leads to several important findings. First, it shows how path dependence and bounded rationality have led lawmakers and policymakers to make questionable decisions and support problematic laws. Second, it demonstrates the power of the real estate lobby to shape the story — and the resultant legal rules ― from both tax and social policy perspectives. Finally, it illuminates the political and rhetorical forces that have shaped tax subsidies for home sales. The Article argues that only by understanding where we were before and how we got to where we are now, can we properly assess where we should go from here.

In assessing tax subsidies for home sales, the Article evaluates the subsidies by reference to the established tax policy criteria of efficiency and fairness while remaining cognizant of the broader context of the social and economic policies regarding homeownership. Although a comprehensive assessment of federal housing policies and the role of tax subsidies in structuring the domestic housing market lie beyond its scope, the Article offers important new insights that will contribute significantly to the ongoing policy dialog about homeownership in our society. In particular, it analyzes the economic impacts of tax subsidies for home sales, including whether and to what extent the subsidies contributed to the real estate bubble. Moreover, the Article highlights the important, but underappreciated, disparate race and gender impacts of homeownership as a wealth-building vehicle. Finally, the Article calls for the repeal of tax subsidies for home sales and argues that the “exogenous shock” of the global financial crisis presents a rare and fleeting opportunity to effect this reform.

Steve Clowney

Scared of Renters

The NY Times details how the rise of renting has unsettled many homeowners in once-stable neighborhoods.  The story includes an illustrative video:

Across the country, a growing number of single-family rentals provides an option for many who lost their homes in the housing crash through foreclosure and for those who cannot obtain a mortgage under today’s tougher credit conditions. But the decline in homeownership is also changing many neighborhoods in profound ways, including reduced home values, lower voter turnout and political influence, less social stability and higher crime.

“When there are fewer homeowners, there is less ‘self-help,’ like park and neighborhood cleanup, neighborhood watch,” said William M. Rohe, a professor at the University of North Carolina at Chapel Hill who has just completed a review of current research on homeownership’s effects. Even conscientious landlords and tenants invest less in their property than owner-occupants, he said. “Who’s going to paint the outside of a rental house? You’d almost have to be crazy.”

Steve Clowney

Cheren & Gerhart on the Ownership of Subsurface Water, Oil, and Gas

Peter Gerhart (Case Western) & Robert Cheren (Case Western) have posted Recognizing the Shared Ownership of Subsurface Resource Pools (Case Western Law Review) on SSRN.  Here's the abstract:

This Article debunks the widely held view that the law of property in oil and gas is governed by a common law rule of capture. Rather, the common law courts embraced the paradigm of shared property for subsurface pools of oil and gas and treated these resources as owned by tenants in common, as modified by a nuisance exception for injuries to subsurface resource pools.

In this revisionist description of the common law, we show that when faced with questions about the disruption of subsurface resource pools, courts were not concerned about title but about the hidden nature of the resources and the resulting inability of courts to determine which oil and gas was underneath which surface property. Instead of focusing on the capture of wild animals, courts held that injuries to subsurface oil and gas are damnum absque injuria and not legally actionable by analogy to earlier cases dealing with subsurface water. Moreover, although courts could not offer a remedy for diminution of subsurface resource pools because the resources were hidden, the migratory nature of the resources induced courts to develop several doctrines that required each surface owner to take into account the interests of other surface owners when deciding how to exploit the subsurface common pool resource: causes of action for malicious interference, waste, and unreasonable exploitation. The common law recognized, on the one hand, limits on the judicial ability to regulate hidden resources while, on the other hand, recognizing the responsibilities that arose from shared migratory ownership of subsurface resource pools.

Readers may also be interested in the Below the Line podcast episode featuring this article, which features  commentary by Professor Laura Underkuffler (Cornell) and Professor Lisa Wyman (NYU), available here.

LA Times Defends Government Intervention in Housing Market

In the business pages of the LA Times, Michael Hiltzik makes the case that the U.S. should continue to encourage homeownership with a full arsenal of government policies.  The piece seems thinly researched and runs counter to much recent academic discussion:

There's no real doubt that homeownership is a goal that should be encouraged by government policy. Homeowners vote more often than renters. They engage more with neighborhood and community groups. Studies suggest that their children do better in school and are more likely to graduate from high school and move on to postsecondary education.

The difference in the length of homeownership is the single largest factor underlying the wealth gap between black and white families, according to research by Thomas Shapiro of Brandeis University. That's important because from 1984 to 2009 the gap in median net worth tripled, from $85,000 to $236,000. Much of the difference is home equity, which gives home-owning families a leg up in helping relatives with down payments, lowering the cost of borrowing and improving access to credit, Shapiro has found.

Steve Clowney

Otubu on Lagos State Land Use Act

Akintunde Otubu (University of Lagos) has posted Lagos State Land Use Act (Title Documentation) Regulation 2012 (Nigerian Bar Journal) on SSRN.  Here's the abstract:

The law regulating use and management of land in Nigeria was changed to the Land Use Act in 1978 consequent upon which the Right of Occupancy became the only permissible and recognized land right existing in the country; evidenced vide the issuance of Certificate of Occupancy by the Governor. Although the Land Use Act recognized the continued existence of prior land rights and epitome of title, their continued existence are subject to the provisions of the Land Use Act. This recognition has led to the growth of parallel land titles competing for relevance and recognition with the Certificate of Occupancy provided for under the Act.

It is trite that the Land Use Act recognized only the grant of right of occupancy and the issuance of certificate of occupancy thereof as the highest proprietary interest available over land in Nigeria and subjects all subsequent transactions on land to the prior consent of the Governor. However, the urge to circumvent the consent provisions of the Act and the bottlenecks from processing the needed grant, made applicants to device surreptitious means backdating their subsequent transactions as if it predates the promulgation of the Act. This led to giving false information and document in order to get the requisite State approval and recognition of land holding. The fraudulent practice continued from the inception of the Land Use Act to date, with dire consequences on the psyche of public officers, the ethic of the civil service, the land market, security of title and tenure and the generality of the land dealing members of the public. The practice breeds corruption, fraud, deceit and forgery in public life; and promotes self service and distrust in governance. The Lagos State government has come out with a new regulation to address the problem vides the Land Use Act (Title Documentation) Regulation 2012. This paper examines the provisions of the new regulation and opines that though the regulation seems to address the problem in the short run, it is not yet uhuru.

Steve Clowney

We're Winning the War Against Homelessness

Stephen Lurie, of the Atlantic Cities Blog, looks at the surprising recent decline of homelessness and labels it a "public policy triumph."  He then asks why more politicians and journalists aren't covering the good news:

Unlike the jobs report, there is no famous, metronomic update on the state of homelessness in America. The "Annual Homeless Assessment Report to Congress" of the U.S. Department of Housing and Urban Development is a front-page rarity. Since its first iteration in 2007, the report that collects information on homelessness nationwide, has been mentioned in one article of the archives of both the New York Times and Washington Post, combined. Coverage of homeless issues—found extensively in the "street papers" produced in many cities like Chicago’s Streetwise—is just not a topic that catches attention for wider audiences.

Steve Clowney

Map of the Day: What Religion Does Your Member Of Congress Identify With?

Buzzfeed has a can't miss series of maps on the religious identities of members of the House of Representatives.

Steve Clowney

Zhang & Zhao on the Effect of Kinship Networks on Private Property Rights

Taisu Zhang (Duke) & Xiaoxue Zhao (Yale - Econ) have posted Do Kinship Networks Strengthen Private Property Rights? Evidence from Rural China on SSRN.  Here's the abstract:

This paper finds that the existence of strong kinship networks tends to enhance property rights in rural China by protecting villagers against unwanted government land takings. It then distinguishes kinship networks from other kinds of social networks by showing that their deterrence effect against coercive takings is far more significant and resilient under conditions of prevalent rural-urban migration than deterrence by neighborhood cooperatives and religious groups. Finally, the paper attempts to identify and differentiate between various possible mechanisms behind these effects: It argues that kinship networks protect property rights mainly through enabling repeated social interaction between members, which facilitates collective action against coercive takings. Kinship networks are more effective than neighborhood cooperatives or religious groups at sustaining repeated social interaction over long distances and, therefore, are less affected by rural-urban migration. Altruism between kinsmen, however, does not emerge from the data as a major factor.

Steve Clowney

Another Broadside Against Zoning

Reihan Salam, one of the right's most creative thinkers, takes a look at housing prices in New York City.  The article name-drops legal academics Bob Ellickson, David Schleicher, and Rick Hills:

In an ideal world, zoning laws would be straightforward enough that developers could navigate them fairly easily without too much case-by-case wrangling with local bureaucrats. New York City’s zoning laws, alas, are far from straightforward. The Bloomberg era has seen an unprecedented number of rezonings and upzonings (increases in allowable density) to allow new development to go forward. Yet it has also seen a great deal of downzoning (decreases in allowable density) and contextual rezoning that has reduced the ability of people to build new housing without seeking special permission in neighborhoods across the city. These downzonings are pushed by neighborhood groups that oppose new development, but they rarely meet with resistance from people who will have to pay the higher housing costs that are the result of downzonings.

Large-scale developers can get around these restrictions when they want to build by making direct appeals to City Hall and going through the complicated and expensive zoning amendment process. But small-scale developers, or individual homeowners who want to build a new housing unit on top of their brownstone, don’t have the time or the money to do the same.

Steve Clowney

Singer on Property, Poverty, and Immigration

Joseph Singer (Harvard) has posted Titles of Nobility: Property, Poverty, and Immigration in a Free and Democratic Society on SSRN.  Here's the abstract:

This keynote address was delivered at the AALS conference on Property, Poverty, and Immigration in June 2013.

Both property and immigration are premised on exclusion yet both human rights and democratic norms require us to treat every human being with equal concern and respect. While neither sovereigns nor owners can have completely open borders, they have obligations to respect the human dignity of "the stranger." Biblical sources link the stranger with the poor and develop a version of the Golden Rule that requires both to be accorded "love." The related secular principle of equal concern and respect means that poverty is, in principle, incompatible with the norms of a free and democratic society. That principle is embodied in the constitutional prohibition on titles of nobility which mandates treating every human being as of equal value and importance. While the nobility clauses do not mandate particular policies, they do outlaw treatment that places some as occupying a lower status than others.This has consequences for both immigration and property law, as well as laws and policies designed to alleviate and prevent poverty.

Steve Clowney

Opportunistic Client Hypo

A poster on the DIRT listserv posted a question yesterday that I am going to give my Real Estate Transactions students this semester.  This kind of proposal from a client is not unusual -- I had a longtime real estate developer client and friend propose that I help him with exactly the same scenario.  We talked through a few possibilities, I explained all the legal risk to him, and he either dropped it or found another lawyer more eager to help him.  Anyway, its (a) very real, (b) fraught with legal and ethical issues, and (c) therefore a great problem for real estate students to debate.  Here is the unedited post to DIRT:

Hello all,

I have an opportunistic potential client (PC) with the following situation: 

1)     PC knows a seller (of improved property) who is willing to take $500k for his property.

2)     PC knows a potential buyer who is willing to pay $850k for said property.

3)     PC would like to somehow give the seller and buyer what they want while taking the extra $350k off of the potential buyer’s hands.

Continue reading

Unauthorized Movie Shot at Disney to be Released

If you are looking for an interesting ripped-from-the-headlines hypo to spark discussion when you are discussing intellectual property, here's another Disney example.  Randy Moore, a guerilla filmmaker shot a movie largely on Disney property, using oodles of Disney IP, without the permission of Disney or any of the park guests that appear in the film.  The film was shown at Sundance and has now secured a distribution deal.  Disney has apparently made no public statement, but hasn't taken legal action either. 

Here's a CNN story which has clips from the movie, and a couple of news articles here and here.

Discuss.

Tanya Marsh

Ground Zero Update

Scott Rabb contines his monumental, decade-long series on rise of the new World Trade Center.   His  latest installment examines security at the Ground Zero site.  The full portfolio of articles is available here.

Steve Clowney

Case of the Week: Remedies for Violation of a Covenant

Joe Singer summarizes the action from Rhode Island:

The Rhode Island Supreme Court has held that an injunction can be granted to stop an owner from deliberately and knowingly violating a restrictive covenant. The traditional balancing of interests used to determine whether an injunction is appropriate need not be done when violation of a covenant is not inadvertent or unknowing. Cullen v. Tarini, 15 A.2d 968 (R.I. 2011). The court found that defendant knowingly violated a covenant that protected plaintiff’s view of the ocean. In such a case, plaintiff was entitled to an injunction to remove the offending structure despite the fact that defendant had already invested $1 million in the project.

In effect, the court treated servitudes as important property rights owned by the servitude beneficiary and found they cannot be violated simply by paying damages. The beneficiary has a right to enforcement without any need to show that the benefits of enforcement outweigh the costs. The court limited the relative hardship doctrine that balances the equities between the parties to situations where an innocent party proceeds without knowledge or notice that he is encroaching on another’s rights.

Steve Clowney

Joint Tenancy in the Age of Cohabitation

What happens when an unmarried couple buys property and one of the parties walks away from the relationship and the other person stays in the home.  Benny Kass gives a brief primer:

In many states, you have the right to unilaterally convert the title into a tenant in common arrangement. This way, should you die, your heirs — pursuant to your last will and testament — will get your half of the house. [...]

I would have your lawyer send him a demand letter, telling him that unless he immediately signs a quit claim deed over to you, you will sue him for back payments that he should have been making.

Next, you can consider filing a partition lawsuit. Courts throughout this country have held that they will force the sale of property where two or more people want out of an ownership relationship, but one person is a holdout. This is time consuming and expensive, but what choice do you have?

Finally, if you are able to ultimately sell, the next question is: How will the sales proceeds be divided? You should take the position that since he refused to sign over the title to you, and has not made any payments for years, he should not be entitled to a windfall, such as any appreciation in the house.

Clearly, any improvements you have made — although they may have been done beyond the reach of the statute of limitations — increase the value of your house, and a court should take these facts into consideration when deciding who gets what.

Steve Clowney

Map of the Day: The Actual Discoveries of European Explorers

Slate highlights this map:

In recent decades, respect for European explorers, such as Christopher Columbus, has waned, likely because these once-romanticized swashbuckling adventurers killed people, eradicated cultures, and “discovered” places that people (for example, the natives) already knew about. They did make some discoveries, though—lands never inhabited or where the inhabitants were already dead before Europeans made landfall. The map above, from historian and cartographer Bill Rankin, shows those places and the country that discovered each.

Steve Clowney

Glennon & Kavkewitz on the Arizona's Share of the Colorado River

Robert Glennon (Arizona) & Jacob Kavkewitz (Arizona) have posted 'A Smashing Victory'?: Was Arizona v. California a Victory for the State of Arizona? (Arizona Journal of Environmental Law & Policy) on SSRN.  Here's the abstract:

Fifty years ago, the U.S. Supreme Court handed down the most important decision in the State of Arizona’s history. Arizona v. California allocated the flow of the Colorado River among the three Lower Basin states (Arizona, California, and Nevada) according to terms of the 1928 Boulder Canyon Project Act (BCPA). Arizonans rejoiced. However, Arizona’s reaction seems perplexing, given that the State spent decades denouncing the BCPA. Arizona challenged the BCPA numerous times in the Supreme Court and engaged in fierce political battles to block its implementation.

This Article explores this riddle by reviewing the legal and political events leading up to Arizona v. California. Ultimately, the Article concludes that the decision was a victory for Arizona because, while Arizona had engaged in its strategy of obstruction, California had steadily been using more of the Colorado River’s flow. California’s use eventually was well above the amount allocated to it in the BCPA -- water that would otherwise have gone to Arizona. To secure legal rights to water that California was already putting to a beneficial use, Arizona needed to convince the Supreme Court to depart from established precedent for determining interstate water disputes and ratify the notion that the federal government could and had allocated an interstate stream among states.

The decision’s impact on Arizona cannot be overstated. On its heels came Congressional approval of the Central Arizona Project, which allowed Phoenix and Tucson to develop into major population and economic centers. But the conflict over how to divide the River is far from over. A growing population and the uncertain yet tangible effects of climate change bring new water challenges to the Colorado River Basin.

Steve Clowney

Students Attempt Land Use Revolution in Ann Arbor

Matt Yglesias highlights this great story out of Michigan:

Here's something cool. Some University of Michigan students are putting together a campaign for local office as the Mixed Use Party with a plan to revolutionize the town's zoning code. The idea is to replace the current "Euclidean" code (under which some areas are residential, some are commercial, blah blah blah) with a very simple "form-based" code. They would create essentially two kinds of zoning areas for the town: "Mixed Use" for downtown and a few dense corridors and "Restricted Mixed Use" for the rest (a small swath of land is set aside for heavy industrial uses).

Here's the plan for Mixed Use areas:

1. Structures must be set back three feet from properties zoned Restricted Mixed Use. On corner lots, structures must not block a driver’s view of a road intersection.

2. The maximum height for a structure is either thirty-five feet, or one-half the distance between the structure and the closest property zoned Restricted Mixed Use. The greater value is the maximum height.

And then in the larger Restricted Mixed Use Area:

1. Structures must be set back three feet from properties zoned Restricted Mixed Use. On corner lots, structures must not block a driver’s view of a road intersection.

2. The maximum height for all structures is thirty-five feet.

Steve Clowney

Freyfogle & Karkkainen on The Institution of Private Ownership

Eric Freyfogle (Illinois) & Bradley Karkkainen (Minnesota) have posted The Institution of Private Ownership: Introductory Essays on SSRN.  Here's the abstract:

One of the appealing aspects of property writing today is the willingness of so many scholars to engage the field a whole, backing away from details and assessing the big picture. It is much-needed work given the importance of private ownership as a contemporary institution, culturally and politically as much as legally and economically.

We are the authors of one of the new casebooks in the field, Freyfogle & Karkkainen, Property Law: Power, Governance, and the Common Good (West/American Casebook Series 2012). As much (or more) than other casebooks it reflects this surge of scholarly interest in the institutional or big-picture side of private ownership. It does so in important part by featuring freestanding essays that identify and comment on foundational issues, exploring them at greater length than is possible in typical casebook notes. As a set, the essays cover what we view as the main institutional elements, ranging from property’s moral grounding and reasons for existence to the modes and most visible directions of on-going legal change. Many students find the essays especially engaging, particularly students with scholarly or critical leanings.

In this writing we have assembled the essays into a set, with revisions (and modest updates) so that they stand alone. We hope they might interest a broader range of readers, personally or for instructional use. We frame our essay topics in what might be termed progressive ways. That is, we present property as a human-constructed, evolving, morally complex social institution, variously beneficial to elements of society and communities, and we open the law of property -– all of it -– to reconsideration. At the same time, we highlight the benefits of legal stability and encourage caution in assuming that institutional change can substitute for individual and cultural reform. One aim is to help students appreciate the causes, modes, and consequences of (presumably) unending legal change.

Steve Clowney