What’s the Deal with Property Rights and Housing?

Weak property rights define our land use regime.

by Luca Gattoni-Celli

This article first appeared on The American Conservative, December 7, 2023

Why is the public image of developers somewhere between that of a used car salesman and that of a Bond villain? A child without social and cultural baggage might view developers extremely positively. They build tall buildings. They oversee construction sites with lots of cool heavy equipment. They give families places to live—more friends to play with!

Of course, many adults view developers as slimy, powerful, and insidious. They are schmoozing and cajoling in the background, driving a hard bargain with public officials, squeezing every cent out of every deal. The Atlantic contributor Jerusalem Demsas notes residents’ understandable resentment of our system’s zero-sum negotiations, pitting public desire for public benefits, in the form of developer “concessions” such as parks and infrastructure improvements, against massive unmet private demand for more homes in places with economic opportunity.

My purpose is not to make you sympathize with developers; rather, I wish to demonstrate that the corruption and sleaze that we associate with development, as well as our debilitating shortage of homes, is primarily a product of weak property rights. Consider the following scenario.

You are 37 and still looking for love, walking downtown on a Tuesday night. You are in a bad mood. You splurged on a nice restaurant, it was your third time seeing this person, and they just cut things short, telling you that you’re great, but it’s not going to work. They insisted on picking up the check and it just made you feel worse. That’s the kind of mood you’re in.

Wandering past city hall, you see a notice for a public meeting of the municipal planning commission. Seeking a distraction, you step inside. A city staffer greets you, explaining the meeting is for a SUP to the GLUP, allowing more density for a new apartment building. A what? A special use permit to go beyond the general land use plan. The building would be just around the corner from where you live. One thing leads to another and you sign up to speak.

Not many citizens are at the meeting but it is going poorly for the developer. A few local neighbors say they are very concerned. Traffic. Shadows. Someone even mentions crime. You are in such a bad mood that when it is your turn to speak, even though you are only repeating what you have heard, and your opinions are pretty vague, you testify with conviction, blasting the city for giving so much away to developers, letting fat cats step on the little guy. You are the sour note proceedings end on. The unelected commissioners look awkwardly at each other then vote to defer the project for further study. In the end, 350 new apartments will become 250. You, a random person off the street, have played a decisive role in evaporating 100 new homes. Poof.

Unfortunately, this story is fairly representative of the entire English-speaking world. A few people testifying at a public meeting can and do sway decisions about development projects worth tens of millions of dollars. We have inherited broad discretion to control where other people live through political means rather than as a natural consequence of economic transactions. Decisions are highly discretionary, based on planning staff interpretations of esoteric documents and the whims of local elected officials. Developers must navigate a Byzantine and intrinsically political process. That is the simple explanation for gamesmanship in property development. Weak property rights define our land use regime.

During the transition from the Gilded Age to the Progressive Era, as streetcar and rail suburbs were fully built out and the automobile became a middle class phenomenon, land use restrictions shifted from keeping factories away from schools to a vaguely defined concept we would today call “livability.” Congestion in those days referred to people packing city streets on foot and residing in crowded, often squalid conditions. So maybe there was a valid rationale to strike some balance.

Yet at least here in the United States, that shift was heavily inflected by prejudice, a desire to exclude “any person not of the Caucasian Race.” This included overtly racist anti-black zoning in cities such as Baltimore, evolving into the 1916 invention of homogenous single-family zoning in booming Berkeley, California. A white developer there sought to ensure that a black dance hall and Chinese laundromats did not encroach on his new neighborhood.

The U.S. Supreme Court upheld single-family zoning in the 1926 Euclid v. Ambler Realty decision, infamously validating the assertion that,

[V]ery often the apartment house is a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by the residential character of the district. Moreover, the coming of one apartment house is followed by others, interfering by their height and bulk with the free circulation of air and monopolizing the rays of the sun which otherwise would fall upon the smaller homes, and bringing, as their necessary accompaniments, the disturbing noises incident to increased traffic and business, and the occupation, by means of moving and parked automobiles, of larger portions of the streets, thus detracting from their safety and depriving children of the privilege of quiet and open spaces for play, enjoyed by those in more favored localities-until, finally, the residential character of the neighborhood and its desirability as a place of detached residences are utterly destroyed.

The court’s opinion concludes:

If these reasons, thus summarized, do not demonstrate the wisdom or sound policy in all respects of those restrictions which we have indicated as pertinent to the inquiry, at least, the reasons are sufficiently cogent to preclude us from saying, as it must be said before the ordinance can be declared unconstitutional, that such provisions are clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.

In 1948, the U.S. Supreme Court ruled racist housing restrictions and covenants unconstitutional, but for at least two decades thereafter, such language remained in deeds in the city I call home, Alexandria, Virginia, near Washington. The message was unmistakable: If you are black, you should not live here. If you try, you will have to contend with more than the law.

Our land use system evolved further across the decades, from suburban white flight to the understandable, though flawed, association of urban density with crime to the New Left’s demand for transparency and open government post-Watergate. Alexandria’s widespread downzoning in 1992 is typical of that era.

Even for a classical liberal, class warfare is the only term that does justice to this set of facts and pattern of history. Conservatives know the Progressive Era’s elitism, which rationalized a range of corrosive ideas from eugenics to the subtle class antipathy that has permeated left-wing politics ever since.

The rub: American partisans of all stripes had a hand in crafting our land use regime to exclude certain groups of people at a societal scale. Through a confluence of economic and demographic factors—from baby boomers staying out of retirement and in their multi-bedroom homes longer than prior generations to professional opportunities concentrating in a few superstar metros—the water has now risen so high that even two incomes of six figures each are hardly enough to buy a house in a nice neighborhood.

Forget “just live somewhere else”; many of us find we were born in the wrong decade, with decent homes now out of reach. Generation X (and millennials) are sandwiched between aging parents and children struggling to find firm economic ground on which to build a life and particularly a family.

Our land use apparatus is not at all designed to produce homes or meet demand or let people live near jobs. Rather, it is designed for the serious purpose of upholding a constitutionally enshrined protection of the free circulation of air and sunshine falling on single-family homes. Quiet and open spaces for play are a privilege, the court affirmed, to be enjoyed by children in more favored localities.

The practical effect of weak property rights is that naked power dynamics easily win out. You need not read the Melian Dialogue to understand that a public input process which privileges in-person testimony at community meetings—often held on weekdays, in the evening and even during the workday—favors retired persons and people paid to attend, and disadvantages essentially everyone else. The imaginary you in the prior scenario was walking off the sting of a disappointing date, i.e., childless and not home putting kids to bed.

Entitlement is a core theme of land use debates. Developers must navigate a so-called entitlement process to secure the right to build, jumping through various bureaucratic hoops even if their project is technically permitted “by-right.” Some of our esteemed elders brush off younger generations’ complaints about housing insecurity and cost of living as a sense of entitlement. “Just work harder” is the frequent reply, regrettably.

However, the greatest entitlement in the housing market is, manifestly, an entitlement to interfere with other people’s property, via legal and quasi-legal mechanisms. Just a hint of ambiguity in the color your neighbor paints their fence might empower you, if you so choose, to ensnare them in a process of discovery and debate with the homeowners association or local government that will be excruciatingly tedious, regardless of outcome.

At my first public meeting, in Alexandria, I watched a respectable, starchy couple politely beg for permission to make small improvements to their property, to prevent their historic home’s basement from periodically flooding with sewage. They were dressed almost as well as the land use attorney they hired, who happens to be one of the best in Northern Virginia. The mayor and city council and city staff were on board, the requisite variance was granted, smiles all around, everyone on the same page. Yet they all had to be there on a Saturday morning.

Under a fundamentally constrained view of human nature, it is generally imprudent to challenge people’s preferences. I moved to the D.C. area more than a decade ago and never wanted to live in a large building, preferring the smaller scale of what is called “gentle density” or “missing middle” housing: multiplexes, garden apartments, and townhomes (the American term for fancified rowhouses). These middle options are missing, or relatively uncommon, because American cities have banned or heavily restricted them for decades. I grew up in a large detached single-family home. Some people want that life, no objections here. But we make all other housing typologies difficult to build. That is the root of America’s housing shortage and affordability crisis.

Any preference for detached single-family homes, even enshrined in law, is not universalizable as a practical matter and economic reality. California’s housing meltdown is a warning that cities cannot house enough people by sprawling out indefinitely. Booming sunbelt cities, even in Texas, with more land than France (ask any Texan), face the same constraint. They too will eventually have super-commuters spending three or four or five hours driving each way, if they treat residential density like pollution.

The fundamental defect of housing policy in the English-speaking world is that property rights, over the most important type of property, are absurdly weak. We have given people awesome power over each other’s lives. Where you live and what kind of home you live in are dictated to you based on your socioeconomic station, just as the original creators of these institutional structures intended. And the decisions within this framework are largely arbitrary. Is it any wonder that fallible human beings misuse this power? The answer is all around us.

This article is part of the “American System” series edited by David A. Cowan and supported by the Common Good Economics Grant Program. The contents of this publication are solely the responsibility of the authors.

Luca Gattoni-Celli is the founder of YIMBYs of Northern Virginia, an all-volunteer grassroots housing advocacy organization. He lives in Alexandria, Virginia, with his wonderful wife and children. Read more at lucagattonicelli.substack.com or email lucagattonicelli@substack.com.