Monday, November 30, 2015
Slate has a nice piece about the background and increasing importance of American claims against the Cuban government:
After Fidel Castro took power in 1959 he nationalized the Cuban economy. He seized the sugar mills. The power plants. Oil refineries, department stores, hotels. Some of these belonged to Cubans. But others belonged to American citizens doing business on the island. Within a couple of years, all the Americans in Cuba fled, leaving this property in Castro’s hands.
Governments expropriate stuff all the time. Even capitalist governments. In America, we call this eminent domain, and the state compensates the people it takes the stuff from. Castro, too, acknowledged the principle that he owed these people something in return. But he never paid up. Eisenhower tried to force him. So did Kennedy. No dice. And so, in retaliation, we slammed Cuba with a trade embargo—one that’s now lasted more than 50 years.
Starting in 1964, the U.S. Foreign Claims Settlement Commission created a registry to record the assets yoinked from Americans who’d been in Cuba. (The FCSC calls itself “a quasi-judicial, independent agency within the Department of Justice which adjudicates claims of U.S. nationals against foreign governments.” Since its establishment in 1954, it has completed claims resolutions against countries including Libya, Panama, the Soviet Union, and Vietnam.) After Castro took power, 5,913 individual Cuba claims were certified. They were assessed at a total value of $1.9 billion at the time they were seized.
Abbye Atkinson (Stanford - Fellow) has posted Modifying Mortgage Discrimination in Consumer Bankruptcy (Arizona Law Review) on SSRN. Here's the abstract:
This Article contends that by permitting debtors to modify primary residential mortgages, consumer bankruptcy law can address persistent and intractable mortgage discrimination in historically disenfranchised communities and support wealth-building and retention in the process. Reframed in this way as a tool of economic remediation and improvement, and not just a form of temporary relief for temporary financial misfortune and crisis, bankruptcy law can address the broader structural forces that produce chronic, racialized, economic subordination, particularly related to homeownership. Accordingly, this Article reconceives consumer bankruptcy as providing not only a “fresh start,” but also an appropriate remedy for financially distressed borrowers whose economic hardships are directly related to illegal and discriminatory mortgage lending practices that lead to or exacerbate financial distress.
Friday, November 27, 2015
Hanoch Dagan (Tel Aviv) has posted The Challenges of Private Law on SSRN. Here's the abstract:
Properly understood, private law establishes ideal frameworks for respectful interactions between self-determining individuals, which are indispensable for a society where all recognize one another as genuinely free and equal agents. Only private law can form and sustain the variety of frameworks necessary for our ability to lead our chosen conception of life. And only private law can cast them as interactions between free and equal individuals who respect one another as the persons they actually are, thus vindicating the demands of relational justice. Hence, the two animating principles of a liberal (that is, autonomy-enhancing) private law — structural pluralism and interpersonal accommodation.
Building on this account of private law, this Essay offers a preliminary survey of three important challenges to private law in a liberal society. One challenge, prompted by the injunction of structural pluralism, is that of identifying missing frameworks, that is: detecting spheres of life in which private law fails to supply a sufficiently diverse set of alternative property institutions or contract types and is thus insufficiently autonomy-enhancing. Another challenge emerges whenever the constitutive good(s) of the social practice that the parties engage in are in tension with the injunction of interpersonal accommodation. These cases require private law to either allow these goods to override the injunction of interpersonal accommodation or else discard or reform the pertinent legal (and social) practice. Finally, because the intrinsic value of private law does not require treating private law and public law as mutually exclusive categories, private law can consider utilizing public law (vertical) mechanisms to help secure its horizontal mission and must be careful not to undermine the liberal state’s commitments to distributive justice, democratic citizenship, and aggregate welfare. I thus conclude with a consideration of the ways in which private law can coordinate with public law, namely: either supplement its doctrinal framework with a regulatory infrastructure or adapt it in order to address pertinent public commitments while still meeting the demands of relational justice.
Wednesday, November 25, 2015
The Atlantic looks at the numbers:
A new report from the National Community Reinvestment Coalition shows the distribution of home loans among Baltimoreans is decidedly uneven: Of the 2,653 mortgage applications submitted by white applicants in 2013, 75 percent were approved. Of the 1,304 submitted by black applicants, 61 percent were approved.
The gap is significant: White residents make up only 28 percent of Baltimore’s population, yet they account for 54 percent of loan applications, and 59 percent of all loans granted. Conversely black residents make up nearly two-thirds of the city’s population, but account for only 27 percent of applications and fewer than one-quarter of all loans granted. Asian residents, according to their analysis, apply for and receive a proportional number of loans based on their population size.
Black applicants are twice as likely to have a mortgage application rejected. Even when they’re approved, black applicants are given higher interest rates and are more likely to be granted subprime loans. In some cases, the argument can be made that these differences are simply a function of economics: White families hold more wealth and have higher median incomes, which can make them more likely to pay loans back on time.
But the NCRC found that wealth gaps between races can’t be used as a catch-all excuse for the discrepancies in home lending. When it compared the lending activity in different parts of the city, the NCRC found that while finances are a driving determinant for mortgage acceptance in the suburbs surrounding Baltimore, within the city it’s race, not money, that best predicts mortgage approvals.
“While majority-white neighborhoods are sites of robust lending activity, majority-black neighborhoods are consistently excluded from lending activity,” the study’s authors write. In fact, the best predictor of mortgage approval was how many white residents lived in a particular neighborhood. In poorer, more heavily black neighborhoods, lending activity was diminished, regardless of income level. That’s a problem in a city where 63 percent of the population is black.
Jessica Wentz (Columbia) has posted Assessing the Impacts of Climate Change on the Built Environment: A Framework for Environmental Reviews (Environmental Law Reporter) on SSRN. Here's the abstract:
Federal agencies are beginning to incorporate descriptions of climate change impacts into environmental reviews for buildings and infrastructure, but there is no consistent methodology for evaluating these impacts and mitigating any foreseeable risks to the project or affected environment. This Article asserts that an assessment of climate-related risks and adaptation options falls within the scope of considerations that should be addressed under the National Environmental Policy Act and similar laws. It concludes with a set of recommended protocols for identifying the impacts of climate change on projects and their affected environment, evaluating physical and environmental risks, and selecting appropriate mitigation measures.
Monday, November 23, 2015
Bethany Berger (UConn) has posted The Illusion of Fiscal Illusion in Regulatory Takings on SSRN. Here's the abstract:
The central economic justification for compensating owners for losses from land-use restrictions is based on a surprising mistake. Compensation is said to make governments internalize the costs of their actions and therefore enact more efficient regulations. Without compensation, the argument goes, governments operate under a fiscal illusion, because from their perspective, their actions are costless.
The problem is that this argument makes no sense as a description of the actual costs to governments. Taxation is the main way governments get revenue, and most taxes depend on the value of property and its permissible uses. If governments restrict land use so as to reduce its value or the income produced by it, its residents, or its patrons, they generally already feel the loss in their budgets. If the restriction creates benefits, those too are reflected in tax revenues. While there are limitations to the accuracy and efficacy of the tax signal, efficient regulations should have a net positive effect on governmental revenues, while inefficient ones should have a net negative effect. Fully compensating owners, in contrast, does not lead the government to accurately internalize societal costs — it rather adds a new and much larger cost. Because this cost usually far exceeds revenue gains, governments may rationally forgo even efficient regulations. Owner compensation, in other words, does not correct fiscal illusion. It creates it.
Revealing the illusion of fiscal illusion leaves standing much older arguments that compensation is required as a matter of fairness. But by clearing away the main efficiency justification for one-to-one compensation, this Article permits clearer-eyed assessment of whether and to what extent fairness may require compensation, and prevents measures in the name of efficiency that in fact undermine it.
Arizona State University’s Program on Law and Sustainability is pleased to announce its Call for Entries for the 2016 Morrison Prize contest.
The Morrison Prize is a new $10,000 cash prize that will be awarded annually to the author(s) of the most impactful sustainability-related legal academic paper published in North America during the previous year. The 2016 prize winner(s) will present the winning paper in a plenary session at the second annual Sustainability Conference of American Legal Educators on May 13, 2016, at ASU’s Sandra Day O’Connor College of Law.
The 2016 Morrison Prize contest is open to full-time law professors who have published environmental sustainability-related papers in printed U.S. or Canadian legal academic journals during the contest period. All papers appearing in a qualifying journal’s final 2014 issue or in an issue printed and circulated prior to November 15, 2015, fall within the 2016 contest period. Works-in-progress and papers that are not published in print form before the deadline are not eligible. Papers focused on topics in environmental law, water law, energy law, natural resources law, land use law, disaster law, climate change law, agricultural law meet the subject matter requirements for eligibility.
Judging Process and Criteria:
The Morrison Prize seeks to recognize the paper published within the eligibility period that is likely to have the most significant positive long-term impact on the advancement of the environmental sustainability movement. All eligible papers entered into the prize contest will undergo independent review and scoring by a diverse group of full-time law professors who teach in environmental sustainability-related areas at four different accredited North American law schools. The identities of these professors will be revealed at the Sustainability Conference of American Legal Educators in May 2016.
The contest scoring system focuses primarily on a paper’s (i) quality and originality of analysis (20%) and (ii) potential for real-world impact on policy developments directly related to environmental sustainability goals (80%). The author’s seniority, home institution, reputational stature and existing body of research are not relevant to the scoring process.
The Sandra Day O’Connor College of Law will announce the 2016 Morrison Prize winner and winning paper in February of 2016. The winner must present the winning paper at the May 2016 Sustainability Conference of American Legal Educators to claim the cash prize. A display in the College of Law’s new Center for Law and Society will honor all Morrison laureates and the generosity of Richard N. Morrison as the founder and funder of the prize.
How to Enter:
To enter the 2016 Morrison Prize contest, mail a cover letter and five (5) offprints of your qualifying paper to: Lauren Burkhart, Sandra Day O’Connor College of Law, P.O. Box 877906, Tempe, AZ 85287-7906. The deadline for submitting papers is November 30, 2015. For any questions regarding the contest, please contact Lauren Burkhart at (480) 965-2465 or [email protected].
Elizabeth Ruth Carter (LSU) has posted The Illusion of Equality: The Failure of the Community Property Reform to Achieve Management Equality (Indiana Law Review) on SSRN. Here's the abstract:
This Article argues that equal management does not exist in any important sense, and that the true goal of the equal management laws was never equality. Community property laws can no longer be honestly described as “a vehicle to ensure the devotion of the couple’s resources to this unique partnership’s purpose: the well-being and future prosperity of the family the couple creates” unless the wife and children are not considered a part of that family. Today, wives in community property states have no better rights than wives in separate property states. In some cases, their economic position may even be worse.
Part I describes the various allocative systems identified by sociologists and provides empirical support for the importance of egalitarian management. Part II describes the historical development of the two legally sanctioned management regimes in the United States: the separate property regime and the community property regime. Part II also examines how spouses actually managed their money in the pre-1970s era. Part III argues that equality was not achieved in fact or in law. First, Part III relies on quantitative and qualitative research to demonstrate that equality was not achieved in fact. Then, Part III examines the history of the reform era and argues that equality was not the primary goal of the legal reforms. Part IV elaborates on this thesis and examines how the laws in effect today perpetuate inequality.
Friday, November 20, 2015
The conference will feature panels and presentations falling within one or more broad subject matter areas pertaining to sustainability, including but not limited to:
- Climate Change Law
- Energy Law
- Water Law
- Environmental Law
- Natural Resources Law
- Land Use and Zoning Law
- Agricultural and Food Law
- Disaster Law
Groups of four are invited to submit panel proposals involving these or any other sustainability-related areas of law. Freestanding presentation proposals from individuals are also welcome. There is no publication requirement.
Arizona State University will provide hotel lodging, meals, and up to $500 for travel expenses for all panelists and presenters.
The deadline for making submissions is December 31, 2015.
Questions regarding the conference and submission process should be directed to Lauren Burkhart, Center Director, at [email protected].
All submissions must include:
1. Brief presentation abstracts (one per presenter, each not to exceed 300 words) and
2. A current CV for each panelist or presenter
Selected panels and presenters will be notified of their selection by January 30, 2015, and will receive instructions for making travel arrangements at that time.
Why the huge differences between states? One recent study explains:
A woman’s ethnicity, race, culture, and socioeconomic status all might affect her chance of having a C-section. There are also staff practices at hospitals that can affect childbirth outcomes. For example, one recent study shows that 24-hour on-call obstetricians and availability of midwifery care may lead to a lower rate of C-sections.
Rigel Oliveri (Missouri) has posted Disparate Impact and Integration: With TDHCA v. Inclusive Communities the Supreme Court Retains an Uneasy Status Quo (Journal of Affordable Housing and Community Development Law) on SSRN. Here's the abstract:
In June 2015, the Supreme Court handed down its decision in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., upholding the use of disparate impact theory in cases brought under the Fair Housing Act. The opinion also contains language affirming the law’s commitment to advance residential integration. In light of the fears about what the Court might have done, the recent ruling has been cause for relief, yet fair housing advocates should be wary, because the majority also offered guidance about how many of these cases should be reviewed on the merits – and it is not favorably. In particular, the Court cautioned against allowing disparate impact claims to interfere with the complex, multifactor decisions of housing developers and municipal officials when they seek to improve neighborhoods and housing conditions, even when such decisions exacerbate or entrench segregated patterns. In disparate impact cases the analysis almost always turns on the defendant’s ability to demonstrate that the challenged practice is necessary to achieve one or more substantial, legitimate, non-discriminatory interests. The opinion thus makes clear that fostering integration is just on one of many legitimate interests, which may also include revitalizing dilapidated neighborhoods, ensuring compliance with health and safety codes, and providing affordable housing, that a local government might pursue. This may mean that so-called “Housing Improvement” cases, which by definition involve legitimate goals, will always be an uphill battle for fair housing advocates using disparate impact theory. Such cases represent a significant subset of the fair housing cases that have relied on disparate impact theory in recent years (including all three to come before the Supreme Court). The extent to which this will represent a change from the status quo, in which many disparate impact claims already founder, remains to be seen.
Thursday, November 19, 2015
For the past 14 years, the Ohio-based specialized services firm Cintas has held a competition to answer a vital question: What is the greatest public restroom in America? This year’s finalists hailed from all over the country, from wine bars in Miami, ball parks in Cincinnati, music halls in Portsmouth, New Hampshire, and pork-focused bistros in Boston.
But this year’s champion bathroom, crowned by voters on Cintas’ website, is not nestled inside some upscale restaurant in a major city. It’s a public restroom in Minturn, Colorado.
A collaboration between the town of Minturn, LaN Architecture’s Monika Wittig, LGM 3d Studios, and Noble Welding, the restrooms are meant to resemble a passageway into a Rocky Mountain mine. “The town rallied together and showed the value of a restroom that’s creative and memorable for guests,” Cintas’s assistant marketing manager Jillian Bauer said in a statement.
It is a rare win for the public restroom, which faces persecution all over America, and indeed, all over the world. Minturn’s win proves that public facilities are not only worth having, but worth thoughtfully designing, too.
Tim Iglesias (San Francisco) has posted California Supreme Court Unanimously Upholds Inclusionary Zoning as Land Use Regulation and Not an Exaction (California Real Property Law Reporter) on SSRN. Here's the abstract:
This article outlines the factual and legal background of the case and discusses the court's reasoning in reaching its decision, including the court's refusal to find the unconstitutional conditions doctrine applies to the target ordinance because it does not constitute an "exaction." The article also identifies existing issues left open following the decision and considers what effect it will have on cities interested in enacting inclusionary zoning ordinances in the future.
Valerie Schneider (Howard) has posted Property Rebels: Reclaiming Abandoned Bank-Owned Homes for Community Uses (American University Law Review) on SSRN. Here's the abstract:
At least theoretically, in many cities, every homeless individual could be sheltered in a bank-owned foreclosed home. In the years since the 2008 financial crisis, however, tens of thousands of bank-owned foreclosed properties have remained vacant in urban areas, attracting crime, degrading property values and creating economic black holes in communities. The public costs associated with abandoned homes are so high that it is often cheaper to destroy homes than to determine how the spaces might be better utilized. This article asks whether modifications to existing property law norms such as adverse possession, which in some cases reward law-breaking, might provide a legal framework through which abandoned homes might be put to community use, not necessarily to end homelessness (which has roots, causes and consequences beyond the scope of this article), but instead to combat the harms to communities caused by blocks upon blocks of abandoned bank-owned homes and to re-engineer the relationships between banks and the communities in which such banks have property interests.
One coalition of community activists has, without an articulated legal narrative for its actions, attempted to do just that — one loosely knit group of activists, calling themselves the “Occupy Our Homes” movement, has worked to shift the dynamic between foreclosing banks and low income communities by placing homeless individuals and families in bank-owned houses. The actions of Occupy Our Homes activists provide a lens through which we might seek to reorganize the bundle of ownership rights possessed by foreclosing banks when those banks fail to maintain and market properties in urban cores. The Occupy Our Homes activists force us to consider whether, when banks fail to properly maintain and market abandoned foreclosed homes, some of the rights that banks possess should be passed to community groups (perhaps community land trusts) through a somewhat relaxed version of adverse possession.
In the time since the 2008 economic crisis, there has been a robust debate among scholars regarding how property law norms might shift in order to address the depletion of property values, the increase in crime and the host of other ills that have flowed from the glut of bank-owned foreclosed homes in urban cores. This article argues that, where communities are harmed by abandoned bank-owned homes and community groups such as the Occupy Our Homes group described herein organize a response, the adverse possession doctrine should be relaxed as other scholars have suggested, but the beneficiaries of such a relaxation of standards should be community groups, not just individual adverse possessors.
Monday, November 16, 2015
New York Magazine scores an interview with a Brooklyn landlord who has a very race-based approach to renting apartments:
We’re small, so we look into places that haven’t caught on — we just did a place on Nostrand Avenue. People are not even there yet. We put in $600,000 and everyone was laughing at us. “It’s crazy, you’re over there. A building for yuppies, white people? It’s not going to work.” The building was full of tenants — $1,300, $1,400 tenants. We paid every tenant the average of twelve, thirteen thousand dollars to leave. I actually went to meet them — lawyers are not going to help you. And we got them out of the building and now we have tenants paying $2,700, $2,800, and they’re all white. So this is what we do.
My saying is — again, I’m not racist — every black person has a price. The average price for a black person here in Bed-Stuy is $30,000 dollars. Up over there in East New York, it’s $10,000 dollars. Everyone wants them to leave, not because we don’t like them, it’s just they’re messing up — they bring everything down. Not all of them.
[...] If there’s a black tenant in the house—in every building we have, I put in white tenants. They want to know if black people are going to be living there. So sometimes we have ten apartments and everything is white, and then all of the sudden one tenant comes in with one black roommate, and they don’t like it. They see black people and get all riled up, they call me: “We’re not paying that much money to have black people live in the building.” If it’s white tenants only, it’s clean. I know it’s a little bit racist but it’s not. They’re the ones that are paying and I have to give them what they want. Or I’m not going to get the tenants and the money is not going to be what it is.
John Lovett (Loyola New Orleans) has posted Somewhat at Sea: Public Use and Third-Party Transfer Limits in Two US States (Book Chapter) on SSRN. Here's the abstract:
This article analyzes how two states, Michigan and Louisiana, have defined the scope of a permissible public use for expropriation and imposed constitutional, statutory and judicial limits on state and local governmental power to expropriate private property and transfer it to other private parties and other public actors. Both states have played prominent roles in debates over the propriety of economic development takings in the last several decades.
In Michigan, the highest court famously permitted such takings in Poletown Neighborhood Council v. City of Detroit before reversing itself in County of Wayne v Hathcock. After Kelo v. City of New London, Michigan moved to impose strict constitutional prohibitions on economic development takings and strengthened compensation rights for residential property owners, residential tenants and other parties affected by expropriation. The first part of this paper traces that history and highlights the crucial role played by the constitutional framework developed by Michigan Supreme Court Justice Thomas M. Cooley in several late 19th century decisions and in his well-known treatise on constitutional law.
Louisiana enacted strict constitutional prohibitions on economic development takings and third-party transfers in reaction to Kelo. After Hurricane Katrina, however, Louisiana struggled to modify those strict limits as it became clear that the demands of post-disaster community revitalization would require a more flexible approach to blight expropriation and subsequent thirty-party transfers. Moreover, at least one state court decision threatens to create a significant loophole in Louisiana’s strict constitutional limits on third-party transfers by approving an expropriating entity’s creative, but formalistic disguise of such transfers in quasi-feudal property forms.
The article demonstrates that in states in which expropriation plays a crucial role responding to economic crises and natural disasters, courts and legislatures’ control over expropriation can reveal significant internal contradiction even as courts and legislatures display skepticism regarding the propriety of post-expropriation third-party transfers. Public use restrictions, third-party transfer prohibitions and compensation rules can prove to be highly malleable legal concepts.
Friday, November 13, 2015
Eugene Volokh has a round-up of some state law on disclosing creepy facts:
Some states maintain statutes which generally dictate one’s duty to disclose murders or other ghastly crimes committed in a home. Florida’s statute provides that “[t]he fact that a property was, or was at any time suspected to have been, the site of a homicide, suicide, or death is not a material fact that must be disclosed in a real estate transaction.” Fla. Stat. Ann. § 689.25(b). Massachusetts law provides that a buyer has no duty to disclose that a property has been “psychologically impacted,” meaning that there is no duty to disclose “that the real property was the site of a felony, suicide or homicide” or “that the real property has been the site of an alleged parapsychological or supernatural phenomenon,” among other things. Mass. Gen. Laws Ann. ch. 93, § 114 (b), (c). California law only requires disclosure of an “occupant’s death upon the real property or the manner of death” if the death occurred in the three years prior to the sale, unless the buyer specifically asks. Cal. Civ. Code § 1710.2 (“Nothing in this section shall be construed to immunize an owner or his or her agent from making an intentional misrepresentation in response to a direct inquiry from a transferee or a prospective transferee of real property, concerning deaths on the real property.”). And sorry, kids, you can’t vandalize a home just because you believe it to be haunted. . . . Hayward v. Carraway, 180 So. 2d 758 (La. Ct. App. 1965).
Josh Blackman (South Texas) has posted Popular Constitutionalism after Kelo (George Mason Law Review) on SSRN. Here's the abstract:
In Kelo v. City of New London, the Supreme Court offered its interpretation of the Takings Clause. We the People disagreed. In an unprecedented legal backlash, Americans from across the political spectrum united to oppose what they overwhelmingly viewed as a grievous constitutional error. But this reaction wasn’t merely political. Through the auspices of popular constitutionalism, the American people worked to abrogate the Supreme Court's understanding of the Takings Clause and replace it with their own.
This symposium essay, written in honor of Ilya Somin’s “The Grasping Hand,” explores how popular constitutionalism emerged after Kelo. Part I offers a brief sketch of the Supreme Court’s decision in Kelo and how it weakened the constitutional protection of property rights.
Part II charts how voters and legislators in forty-five states enacted reform legislation to curb eminent domain abuse, and claw back Kelo. The intensity and fervor with which the states tackled this issue — in particular those enacted through popular referenda rather than the legislature — is a testament to the populace’s rejection of the Supreme Court’s constitutional interpretation. Kelo offers an exemplar of how the people, and not the Supreme Court, remain the final arbiters of the meaning of our Constitution.
Part III highlights how popular constitutionalism also impacts state court judges interpreting state constitutions. In one of the more curious developments following Kelo, state courts consistently disregarded Kelo as a guide for interpreting their state constitutions — a departure from how these same courts had followed the federal Supreme Court’s lead on the Takings Clause for decades. Many of these judges, acting as conduits of the people, expressly rejected Kelo.
Through both legislative and judicial channels, Americans manifested a wide-ranging constitutional repudiation of the Supreme Court’s decision. On Kelo’s inglorious decennial, thanks to popular constitutionalism, eminent domain ain’t what it used to be.
Wednesday, November 11, 2015
Benny Kass of the Chicago Tribune offers the standard advice:
There are several things you can do when your neighbor is trespassing on your property.
You can seek a permanent injunction so that he cannot go onto your property. If granted, should your neighbor continue to trespass on your land, he would be in contempt of court and a judge could either fine him or put him in jail (or both) until he complies with the permanent injunction order.
You can also sue him for damages for trespassing on your property. The permanent injunction allows you to get a court order prohibiting him from violating your land. The lawsuit I am recommending is to get money damages for the loss of your property.
You need a good real estate attorney to assist you. Will you be awarded attorney fees should you win? That's a tough question because our courts follow what is known as the American Rule on legal fees. Unless there is a statute or provision in a contract whereby the prevailing party would be awarded legal fees, each side pays his own attorney.
Darien Shanske (Davis) has posted Local Government Finance as Integrated System: The Uneasy Case for Using Special Districts in Real Estate Finance (A Response to Odinet's Super-Liens to the Rescue? A Case Against Special Districts in Real Estate Finance) (Washington and Lee Law Review Online) on SSRN. Here's the abstract:
Local governments have long used special financing districts to build infrastructure. If a local project, say building a pocket park, is likely to increase the values of properties very close to the park, then why should those properties not pay for the park in the first place? Though efficient and fair in many cases, the use of these districts can also be problematic. For instance, it seems likely that wealthier residents, with higher property values to leverage, are especially likely to use these districts effectively. It has also been the case that developers have used these districts speculatively, which had serious repercussions during the last recession. Christopher Odinet develops an additional, and important, critique of these districts. Odinet observes that these districts obtain a lien on benefiting properties, and that this lien takes priority over the liens of conventional lenders. Odinet then argues that this super-priority should only be honored if the district has served some substantial public purpose.
In this short Response, I agree with Odinet that these districts are problematic, but wonder whether his solution is the best one. This is because traditional lenders will generally know about these districts before lending. Furthermore, his solution only kicks in if there is an event of default, which is unusual, and thus this solution does not do much to counter the run of the mill socio-economic stratification that these districts often enable. I argue that an ex ante approach limiting the use of these districts therefore seems preferable. I conclude with the argument that, despite all their flaws, these districts should not be abolished outright. Local government finance is a dynamic system and the absence of any tool, even one prone to abuse, can have severe consequences, as illustrated by the recent history of California.