US States Are Seizing More Power in...

 US States Are Seizing More Power in the Name of "Deregulating" Housing

Matt Ray for Mises 

Local zoning is not likely to garner much national attention, and in an ideal world, this is the way it should be. However, with state governments taking aim at local zoning restrictions, the issue has taken on greater importance. In recent years, the movement to limit single-family zoning restrictions has been championed by left liberals and libertarians alike. According to these libertarian supporters, antizoning laws represent simple deregulation. However, calling these laws deregulation is akin to calling the USMCA (United States-Mexico-Canada Agreement) a free trade agreement. To the contrary, this trend has already led to the further erosion of private property rights in California with the passage of Assembly Bill 670.

Such is the power of AB 670 that it nullifies private restrictions on accessory dwelling units (ADUs) that are deemed “unreasonable,” such as restrictions included by homeowner’s associations in their CC&Rs (covenants, conditions, and restrictions). Yet, the nullification of all such private restrictions is in direct conflict with the title-transfer theory of contracts. Murray Rothbard explains,

a person should be able to sell not only the full title of ownership to property, but also part of that property, retaining the rest for himself or others to whom he grants or sells that part of the title….Similarly valid and enforceable would be restrictive covenants to property in which, for example, a developer sells all the rights to a house and land to a purchaser, except for the right to build a house over a certain height or of other than a certain design.

It should be clear, then, that private restrictions prohibiting the construction of ADUs can be entirely consistent with private property rights. As such, any law that eliminates the possibility of these restrictions is untenable. The one caveat is that there must be some existing owner of the reserved right. In other words, the restriction simply can’t continue indefinitely against the wishes of all living owners of said property. Currently, some neighborhoods may require all homeowners to agree to their CC&Rs before moving in. Elsewhere Rothbard has outlined how this would work if all property were privately owned. Rothbard writes,

In a country, or a world, of totally private property, including streets, and private contractual neighborhoods consisting of property-owners, these owners can make any sort of neighborhood-contracts they wish. In practice, then, the country would be a truly “gorgeous mosaic,” (in the famous words of New York Mayor Dinkins), ranging from rowdy Greenwich Village-type contractual neighborhoods, to socially conservative homogeneous WASP neighborhoods. Remember that all deeds and covenants would once again be totally legal and enforceable, with no meddling government restrictions upon them. So that considering the drug question, if a proprietary neighborhood contracted that no one would use drugs, and Jones violated the contract and used them, the fellow community-contractors could simply enforce the contract and kick him out. Or, since no advance contract can allow for all conceivable circumstances, suppose that Smith became so personally obnoxious that his fellow neighborhood-owners wanted him ejected. They would then have to buy him out—probably on terms set contractually in advance in accordance with some “obnoxious” clause.

Under this anarcho-capitalist model, the issue is uncomplicated. If a prospective buyer finds one neighborhood’s restrictions intolerable, then they must either choose a more suitable neighborhood or acquire the restricted rights from the current owner. While reality is very different from the anarcho-capitalist model, the aforementioned scenario is still a realistic one and demonstrates that institutions such as HOAs and CC&Rs can provide the means to organize communities without the state.

Moreover, there are very good reasons private property owners may wish to exercise these rights and agree to restrictions on the type of housing that can be built. While neighborhoods provide economic benefits by lowering transaction costs and facilitating exchange, neighborhoods—like any investment—involve risk. One such risk is that because land is immobile, the value can easily increase or decrease based on the surrounding property. In our present case, homeowners may value their property more because it is in a neighborhood zoned for single-family residences only. Indeed, advocates of these measures argue that abolishing single-family requirements will lower the price of housing, and this is exactly what current property owners may wish to avoid with restrictive covenants.

Thus, by interfering with property subject to restrictive covenants, the State of California is removing the means by which homeowners can mitigate the risk of declining property values and help ensure they live among neighbors with similar preferences. Homeowners who paid dues to their HOA for years only to see the rules they paid for nullified by the state suffer an immediate loss. This loss may prove to be particularly devastating if their wealth is largely their home equity.

While zoning may seem like a relatively minor issue, preserving the liberty that still exists will require more of a focus on these local issues and less attention paid to national politics, where little can be done anyway. Otherwise, governments could quietly remove more decisions from the control of neighborhood property owners.

If supporters of these bills truly wish to see more choices in housing and neighborhoods as they claim, then we should share this aim. However, this must include the choice to make the neighborhood as restrictive or open as neighborhood property owners wish; we must never presume to know what’s best for any other neighborhood. This can only be accomplished by respecting all existing private property rights—including restricted property titles—and resisting all attempts to nullify these voluntary arrangements. Only then will we see conflicts minimized and individual liberty maximized.