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November 2009
Vol. 23, No. 10
The Law
Property Rights or Property Permissions?
A disturbing trend, reaching back to the Progressive Era, continues to deform property rights in America.
Timthy Sandefur is a senior staff attorney at the Pacific Legal Foundation.
When Craig and Robin Griswold applied for a building permit to renovate their small home in the southern California city of Carlsbad, they were shocked to learn what city officials wanted in exchange: the city demanded that they give up their right to vote.
Article XIII of the state constitution guarantees California homeowners the right to vote on whether their properties are assessed for the value of local improvements such as the construction of new streetlights or sidewalks. Assessments differ from property taxes in that they are levied only on the properties in the neighborhood that benefit from these improvements. In 1996, after years of abuse by cities that routinely assessed property owners without restraint, voters passed an initiative amending the constitution and requiring cities to hold elections before assessing property owners for local improvements.
But Carlsbad officials have found a way to avoid this constitutional provision. Rather than allowing homeowners to vote on assessments, the city simply imposes assessments on homeowners whenever they remodel their homes in ways that cost more than $75,000. This estimate is done by the city, according to its own formula, when the homeowner applies for the necessary building permits. If the city thinks the renovation would exceed that amount, it automatically — and illegally — assesses the owner for the construction of sidewalks, curbs, lighting, and other projects. This demand can be extremely expensive: in the Griswolds’ case, the city asked for an upfront payment of $114,979.
But, recognizing that such an amount would prove prohibitive to many homeowners, the city also offers an alternative. For those who cannot afford the illegal assessment, the city offers a waiver form, giving up the voting right conferred by the state constitution, and waiving any right to “file or bring any protest, complaint, or legal action of any nature whatsoever challenging the validity of the proceedings.” This waiver is quite explicit, specifying that “the owner hereby consents to, and approves of . . . the levy of an assessment against the property . . . [and] grants to the city a proxy to act for and on behalf of the owner, the owner’s successors, heirs, assigns, and/or transferees, for the limited purpose of completing and submitting an assessment ballot in support of the levy of the assessment.” In other words, in exchange for a permit to renovate their home, the Griswolds were forced to give up their constitutionally protected voting right — and the waiver binds not only the Griswolds, but anyone to whom they might sell or give the property.
The Griswolds, represented by attorneys at the Pacific Legal Foundation, filed a federal civil rights lawsuit to challenge the constitutionality of the assessment scheme, arguing among other things that it’s an illegal poll tax, since the city conditions the right to vote on the payment of a fee. Although the trial court dismissed the case on a procedural technicality, the Griswolds appealed to the 9th Circuit Court of Appeals, which heard oral arguments in May.
It might seem outlandish that government officials would demand that property owners waive their right to vote in exchange for a building permit, but this case is only one extreme example of an increasingly common phenomenon: the abuse of permitting powers by local governments that want to force property owners to give up their rights — to money, to land, or to the ballot — in exchange for permission to use their own property as they wish. Nor is it an isolated incident. The city of Santa Rosa, California, enforces an ordinance that forces permit applicants to give up their right to vote on a different kind of tax. Similar rules appear to be in place in Missoula, Montana.
In the 1987 case of Nollan v. California Coastal Commission, the United States Supreme Court invalidated an attempt by one of the state’s most intrusive bureaucracies to extort land from a Malibu family who sought a permit to construct a second story on their home. Commission members claimed the home would create a “psychological barrier” between motorists on Pacific Coast Highway and the nearby beach. But rather than denying the permit, or imposing a height restriction, the Commission demanded that the Nollans agree to an easement allowing the general public to walk across their yard to the beach. In the decision he wrote for the 5–4 court, Justice Antonin Scalia explained that government agencies cannot make demands on property owners that are totally unrelated to the potential effects of construction. They may make such demands only when proposed construction might harm the public or impose significant new demands on public resources — as when new home construction will increase traffic and overload local roads. Even then, the demands must somehow help alleviate those effects. If the government can make demands on permit applicants without any such connection, Scalia wrote,
the situation becomes the same as if California law forbade shouting fire in a crowded theater, but granted dispensations to those willing to contribute $100 to the state treasury. While a ban on shouting fire can be a core exercise of the State’s police power to protect the public safety . . . adding the unrelated condition alters the purpose. . . . Similarly here, the lack of nexus between the condition and the original purpose of the building restriction converts that purpose to something other than what it was. The purpose then becomes, quite simply, the obtaining of an easement . . . without payment of compensation. . . . In short, unless the permit condition serves the same governmental purpose as the development ban, the building restriction is not a valid regulation of land use but “an out-and-out plan of extortion.”
Scalia’s point seems obvious if one presumes that landowners have the right to use their property as they see fit, consistently with the rights of others. Under this premise — known in the law as the “sic utere principle,” from a Latin phrase meaning “one should use one’s property so as not to injure someone else” — it makes sense for the government to deny permits to people whose construction might harm the public. Government agencies might also take a lesser step than outright denial: they might require the owners somehow to reduce the deleterious effects of their projects, for instance. If officials have the “power to forbid construction,” wrote Scalia, then they also have “the power to condition construction upon some concession by the owner, even a concession of property rights, that serves the same end.”
But not everyone holds the sic utere principle that property owners are free to use their land as they see fit. Indeed, many if not most judges and law professors today view that right as no right at all, but rather as a permission given by the state to those citizens it deems worthy. On this premise, requiring owners to pay for the privilege of using their property makes perfect sense. This was the approach taken by Justice William Brennan, who wrote a dissenting opinion in the Nollan case. “[S]tate law is the source of those strands that constitute a property owner’s bundle of property rights,” he argued. Thus if a state decrees that owners have no right to develop their property, or to exclude others from walking across it, that is the end of the matter. He regarded it as “curious” for Scalia to “somehow suggest[] that ‘the right to build on one’s own property’ has some privileged natural rights status.”
In the two decades since Nollan, some academics have gone quite far in arguing that owners of property can be forced to pay for the privilege of using what belongs to them. Professors Gideon Parchomovsky of the University of Pennsylvania and Abraham Bell of Fordham have labeled this approach “givings,” to contrast it with the 5th Amendment’s “takings” clause. When the government takes an action that increases the market value of property — such as granting a building permit — it may, in their words, “collect a ’fair charge’ in exchange for the giving.” Whether or not lawyers and judges explicitly embrace Bell and Parchomovsky’s approach, it is in reality the way many local governments view their permitting authority. In fact, shortly after the Griswolds filed their voting rights lawsuit, Carlsbad City Attorney Ron Ball told the San Diego Union-Tribune, “In this state, development is a privilege and development is allowed to be conditioned.”
This is the crux of the dispute. If private property is a basic human right, then it pre-exists the state, and government bears the burden of justifying the limits that it imposes on an owner’s freedom to use what belongs to him. But if property is created by government’s decision not to interfere, then the owner must obtain that permission by yielding other rights. As Janice Rogers Brown, then a justice on the California Supreme Court, wrote in a 2002 case, local governments taking the second approach effectively tell property owners, “We have the power; therefore, pay us to leave you alone. By any measure, that is extortion. . . . Instead of the government having to pay compensation to property owners, the government now wants property owners to compensate it to get back the fair value of property the government took away through regulation.”
The notion that property rights are created by government fiat is an old one, but its contemporary form is a legacy of the Progressive Era, when philosophers and judges overthrew the concept of natural rights underlying the American Constitution, and replaced it with the positivist view that rights are simply spaces of free discretion that citizens enjoy thanks to the state’s protective influence. Progressive intellectuals were often quite explicit that their theory did not stop with property rights: all rights, including freedom of speech and freedom of religion, were simply privileges of citizenship. “All my life I have sneered at the natural rights of man,” wrote Oliver Wendell Holmes, one of the pioneers of the Progressive approach. For Holmes and his allies, the state manufactured individual rights to serve its own purposes. Thus, for instance, free speech was to be protected, not to preserve individual autonomy, but because society benefits from the exchange of opinions. “Persecution for the expression of opinions seems to me perfectly logical,” wrote Holmes in a famous 1919 case. But “the theory of our Constitution” is that “the ultimate good desired is better reached by free trade in ideas.” And since government creates the freedom of speech to serve its own ends, it can also squelch free expression if that is more conducive to its ends. Thus in another case that same year, Holmes held that a war protester could be jailed for distributing pamphlets protesting the draft. “When a nation is at war many things that might be said in time of peace are such a hindrance to its effort that their utterance will not be endured.” The Progressives took the same view of private property. Justice Brandeis encapsulated the era’s attitude toward individual freedom when he wrote “rights of property and the liberty of the individual must be remolded, from time to time, to meet the changing needs of society.”
The conception of private property as a tentative government permission carries with it troubling philosophical and practical baggage. First, it implies that wealth is a fixed product to be divvied up according to some criterion such as fairness or equality. It takes no account of the origin of wealth, or of the rights of those who produce it. The classical liberal conception of private property on which the Constitution was based sees property as inseparable from the liberty with which the individual creates wealth. Because a person devotes time and effort to the construction of a thing, that thing is rightfully his, not according to a scheme of social improvement, but according to principles of justice. Grounded in the individual’s natural desires for a realm of privacy and the improvement of his standard of living, this conception of property rights combines a humane moral insight — that, in John Locke’s words, “being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions” — with powerful economic incentives. Each person is responsible for his own pursuit of happiness, able to enjoy the rewards, and required to suffer the burdens, of his own private choices. But the Progressive approach is silent on the questions of wealth’s origins, or the individual’s just claim to the product of his labor. Instead, it assumes that wealth — and the individual effort that gives rise to it — belongs to the state, and should be distributed according to the state’s lights. Indeed, for the Progressives there were to be no meaningful barriers to the government’s power of controlling individual choice and redistributing wealth. “To these thinkers,” wrote political scholar Charles Merriam in 1903, “it appears that the duty of the state is not and cannot be limited to the protection of individual interests, but must be regarded as extending to acts for the advancement of the general welfare in all cases where it can safely act, and that the only limitations on governmental action are those dictated by experience or the needs of the time. . . . It is not admitted that there are no limits to the action of the state, but on the other hand it is fully conceded that there are no ‘natural rights’ which bar the way. The question is now one of expediency rather than of principle.” That this approach posed a serious danger to individual freedom and dignity was made clear by the Progressives’ later successes in imposing prohibition, segregation, and eugenics programs — including the forcible sterilization of women, which Justice Holmes ruled to be constitutional in the infamous 1927 case Buck v. Bell. The right to have children was just another discretionary benefit that the state could take away for society’s “benefit.”
Lawyers refer to local governments’ extortionate demands from property owners as “exactions,” and in addition to their philosophical weaknesses, they have some troubling practical consequences. Exactions have become so commonplace that some researchers blame them for the wildly distorted cost of real estate in states like California, where the abuse of permitting powers is particularly egregious. In his latest book, “The Housing Boom And Bust,” economist Thomas Sowell even blames them in part for the recent economic downturn. Sowell observes that one of the reasons for the artificial rise in housing prices preceding last year’s real estate crash was the excessive burden placed on builders by local government regulators. Because exactions and other bureaucratic costs emanate from city or county governments, the national market became speckled with enclaves of exaggerated housing costs. Although “most of the country was not suffering from skyrocketing housing prices,” those communities with excessive burdens on construction were — and the consequence was an illusory crisis that politicians strove to address by devising easy financing options for risky first-time buyers. “Government regulations and interventions are precisely what pushed lending institutions to reduce the standards which they had traditionally required of prospective borrowers before making mortgage loans to them.” It was the lowering of those standards that precipitated a series of defaults leading to today’s recession.
It is easy to see why the burdens that local governments put on building permits would translate into confiscatory housing prices. In one 2006 case, the Sacramento suburb of Elk Grove, California, demanded that Muhammed Ahmad and his wife Jonette Banzon pay $240,360 in “in lieu fees” in exchange for a permit to construct a second story on their home. The city explained that the fees were for such street improvements as paving roadways, adding street signs and stripes, and for the planting of new trees. In another case, the California Coastal Commission agreed to allow Dan and Denise Sterling to build a home on their 143-acre property in San Mateo County — but only if they signed a permanent easement pledging forever to use 142 acres of their land as a farm. The Sterlings aren’t farmers or ranchers, but the owners of a modest doublewide where they live with their four children. “[T]he Commission wants most of my land put under a government easement and set aside for farming,” said Dan Sterling, “but farming is the one thing my family couldn’t make a living at with this property. What’s really happening here is that we’re being forced to give this land over as a park or open space for the community, but we still pay taxes on it, and are still responsible for the other liabilities of property ownership.”
Forcing particular landowners to give up rights in exchange for permission to use their property allows local governments to avoid the politically unpopular alternative of paying for public amenities with tax dollars. If political leaders can make developers pay for the construction of roads, streetlights, new libraries, or parks, such projects seem to most voters to have been provided for “free.” In fact they are not free; they are extracted from individual property owners who lack the political influence necessary to defend themselves from political exploitation. And, as the New York Court of Appeals observed in a 1976 decision,
the ultimate economic cost of providing the benefit is hidden from those who in a democratic society are given the power of deciding whether or not they wish to obtain the benefit despite the ultimate economic cost, however initially distributed. In other words, the removal from productive use of private property has an ultimate social cost more easily concealed by imposing the cost on the owner alone. When successfully concealed, the public is not likely to have any objection to the “cost-free” benefit.
These effects became starkly real to southern California businesswoman Janet Auxier in 2006, when local officials ordered her to construct three new sections of roadway, install traffic lights and a new water main, and make other improvements totaling more than $200,000 — even though she had not applied for a permit to begin with. Auxier, who runs a business that sells decorative rock and gravel, bought the land in 2003 in the desert city of Hesperia, California. The property, which sits alone with no neighboring structures, had previously been used by a business that sold plaster and drywall. The large lot and isolated building were perfect for storing and selling different types of rock. She never planned to build on or renovate the property, which was already properly zoned for her business.
Nevertheless, city enforcement officers began fining her for operating without a “site plan,” a complicated document that, according to city ordinances, only developers are required to prepare. Although the city never told her why she was being required to prepare such a plan when she was not a developer, Auxier hoped that the city would leave her alone if she cooperated. She hired an engineering company to prepare a site plan which would make clear that she did not intend to build anything or change the property in any significant way. Nevertheless, after three years of negotiations, and more than a dozen fines, officials finally accepted her site plan only on the condition that she construct hundreds of thousands of dollars in new public improvements — improvements with no relationship to any effects of her use of the property. Pacific Legal Foundation attorneys took Auxier’s case to challenge the city’s actions; that lawsuit is now awaiting review by a trial court.
The city’s motives are clear. By requiring Auxier to pay the cost of improvements, political leaders can portray themselves as visionaries and their cities as dynamic pro-growth communities, without requiring voters to face the costs of public economic-development programs. Meanwhile, individual property owners like Auxier don’t have the political muscle to persuade local officials to leave them alone. They are the quintessential “insular minority.” Yet despite courts’ self-serving claims that they take special care to protect minority rights, judges actually make little effort to defend property owners from such exploitation. Dominated still by Progressive-era attitudes toward private property, the judiciary virtually always defers to local government authority — most notoriously in the 2005 eminent domain case, Kelo v. New London, when the Supreme Court abandoned any serious legal limit on the power of local officials to seize homes and businesses for the benefit of politically connected developers and ambitious bureaucracies.
Rules limiting the uses of land have existed for centuries. But the Progressive era witnessed a fundamental intellectual shift, as intellectual leaders — and particularly lawyers and judges — jettisoned the founders’ classical liberal conception of natural rights and replaced it with the idea of rights as permissions. This helped reinforce the Progressives’ fondness for central planning and urban redevelopment. “Progressives loathed the absence of a comprehensive plan,” wrote law professor Eric Claeys in a recent issue of the Fordham Law Review. “Recall that Progressives liked to equate the local community to an organism. . . . Progressives measured the political health of the city by the extent to which citizens acted with a common purpose; a comprehensive prearranged city plan was proof that they were.”
That era’s leading innovation in land-use control was the concept of “zoning,” validated by the U.S. Supreme Court in the case of Village of Euclid v. Ambler Realty in 1926. Justice George Sutherland, torn between his own Progressive political leanings and his sincere belief in the importance of private property rights, ruled that zoning laws were constitutional because they simply modernized the long-understood principles of nuisance law: “There is no serious difference of opinion in respect of the validity of laws and regulations fixing the height of buildings within reasonable limits, the character of materials and methods of construction, and the adjoining area which must be left open, in order to minimize the danger of fire or collapse, the evils of overcrowding and the like, and excluding from residential sections offensive trades, industries and structures likely to create nuisances,” he wrote. In his eyes, zoning simply existed to prevent “a right thing in the wrong place, like a pig in the parlor instead of the barnyard.”
But zoning was much more than that, as became clear over the ensuing decades. Rather than organizing the uses of property in any systematic and rational way, zoning laws only shifted the power to determine the use of land out of the hands of property owners — where those decisions were made by balancing supply and demand — and into the hands of political authorities, where decisions are made on the basis of popularity and influence. The zoning map of any major metropolitan area today would probably look every bit as random and haphazard as the land-use map of a century ago. Cities are not more rationally or systematically planned now; the major difference is that land-use decisions are made on a political rather than on an economic basis. Houston is the last major city in America not to have adopted extensive zoning (although city officials exploit a variety of land-use restrictions to achieve similar purposes). Yet while some of its neighborhoods are more eclectic than neighborhoods in cities with zoning, these differences are not dramatic. Instead, land uses in Houston are more closely tied to the actual desires of consumers and landowners than they are in other cities, where they are dictated more by the political influence of developers, environmentalists, unions, and other lobbyists. One consequence is that housing costs in Houston are significantly lower than those in other cities. A 2,000-square foot home in Houston costs about $120,000; in New York City the price is $1.7 million. As a Houston-area contractor wrote in a recent issue of The Objective Standard, “Because Houston’s builders and developers are less shackled by land-use restrictions, they are able to use property in ways that make the most economic sense; they are better able to supply the market with property for each type of use; they are able to sell and lease property at lower prices; and they are able to change land uses more easily and efficiently than would be possible under zoning laws.”
So long as zoning was seen as a variety of nuisance law, it was possible that such restrictions might be logically limited. The concept of “nuisance” builds on the sic utere principle. Sic utere accorded property owners a broad realm of individual choice. But as zoning morphed into the Progressive central planning model instead, land uses became dictated by a new principle: an individual may use land only so far as approved by government officials. In his book “Restoring The Lost Constitution,” law professor Randy Barnett argues that “we must choose between two fundamentally different constructions of the Constitution. . . . We either accept the presumption that in pursuing happiness persons may do whatever is not justly prohibited or we are left with a presumption that the government may do whatever is not expressly prohibited.” But in the context of private property rights, this choice was made long ago by the Progressive-era shift away from traditional nuisance concepts — premised on the classical liberal view that individuals have the natural right to act freely as long as they injure nobody else — and toward the central planning conception that individual freedom is only a privilege the individual lacks until given it by the state. With that shift, zoning was transformed from a rule for keeping pigs out of parlors, into a tool with which bureaucrats could sculpt neighborhoods as they saw fit.
Like zoning laws, permit-based exactions give government officials, instead of consumers, broad power to make decisions about the land use. One common exaction demanded of developers who wish to construct apartment buildings is that they also build a certain amount of “affordable housing.” For example, in 2006, the city of Santa Monica, California, adopted an ordinance forcing developers to rent at least 20% of their apartment units at below-market prices. A coalition of apartment owners sued, arguing that under the Nollan decision, the ordinance was an unconstitutional taking of their property. But state court judges dismissed the case, holding that the limits set by the Nollan decision do not apply to exactions imposed by ordinances, but only those imposed by zoning boards or other committees. The United States Supreme Court refused to hear the case.
A lawsuit like the Griswolds’ voting rights case may seem extreme, but in fact there is little difference in principle between it and demands by other local governments that property owners yield land or money in exchange for permits. If property rights are only a privilege extended by government fiat, then public officials have broad power to set the conditions for those grants. And if it can force landowners to give up their money, or their land, or to devote some of their property to below-market rental or to permanent farming, why not also demand that she waive her right to vote?
The central problem is the shift away from the Founders’ classical liberal view of natural, human rights and toward the Progressives’ view that rights are permissions based on political consensus. With that shift came a gradual change in the nature of land-use regulation; originally a mechanism for preventing nuisances, land-use planning morphed into a device for centralized social planning. Where nuisance law sought to protect each person’s equal right to use property as he sees fit, the Progressive central planning model holds that experts should choose the “right” uses of land — uses that may or may not reflect the actual desires of individuals — and enforce that vision on property owners. The problems with land-use regulation will not be resolved until Americans, and particularly lawyers and judges, rethink their basic philosophical approach to private property rights.
But this endeavor, too, is obstructed by the legacy of Progressive-era judges, who believed that courts have no business addressing philosophical issues. They argued that such issues are better left to the legislature; in their eyes, the judiciary’s role is limited solely to applying the law. This was the theory of “judicial restraint,” another Progressive-era innovation. “If my fellow Americans want to go to Hell, I will help them,” Oliver Wendell Holmes told a friend. “That’s my job.” But this conception of the judge’s role would have struck the Constitution’s authors as farcical and dangerous. They expected and even encouraged judges to address complicated and abstract questions of justice and individual rights. Indeed, it is impossible for judges to interpret the Constitution without doing so. That document explicitly declares that no person shall be deprived of property without due process of law. Yet these terms are left undefined. Without understanding what the framers understood by the words “law,” or “property,” this constitutional injunction is incomprehensible. Holmes and other Progressive judges held that the Constitution does not embody any particular political or economic theory at all, but is a blank slate on which electoral majorities can write their preferences into law: “It is made for people of fundamentally differing views,” Holmes wrote in his most famous dissenting opinion. “The word ’liberty,’ in the 14th Amendment, is perverted when it is held to prevent the natural outcome of a dominant opinion. . . .” To James Madison and other Founders, this was the very definition of liberty in a democracy. “Wherever the real power in a Government lies, there is the danger of oppression,” Madison wrote in 1788. “In our Governments the real power lies in the majority of the Community, and the invasion of private rights is chiefly [sic] to be apprehended, not from acts of Government contrary to the sense of its constituents, but from acts in which the Government is the mere instrument of the major number of the constituents.”
Thanks to the overwhelming influence of Progressive thinkers, however, many of today’s judges, including such conservative stalwarts as Justice Scalia, hold that questions about human rights are beyond their purview. Indeed, in the Nollan case itself, Scalia made a remarkable concession. While explaining that land-use restrictions must relate to a legitimate government interest, he observed that “Our cases have not elaborated on the standards for determining what constitutes a ’legitimate state interest.’?”
This is an astonishing thing to say. If the justices of the United States Supreme Court cannot say with any degree of confidence what is and is not a legitimate state interest, then they would seem to have no work left to do. If one does not know the ends one is pursuing, then one has no foundation for discussing the means chosen to pursue them. It would be like trying to judge the usefulness of a map without having any destination. And if one has no concept of the boundary between legitimate and illegitimate government purposes, then there is little room left for a judiciary designed to police the boundaries of legislative power.
Of course, the Constitution’s authors knew well enough what a legitimate state interest is: they wrote as much in the Declaration of Independence, when they said that government exists to secure individual rights to life, liberty, and the pursuit of happiness — not to redistribute wealth for the benefit of politically influential lobbyists. Their belief that government should, in Jefferson’s words, “restrain men from injuring one another” and “leave them otherwise free to regulate their own pursuits of industry and improvement,” is fundamentally incompatible with the Progressive view of rights as government permissions, much less their faith in the central planning model of land-use regulation, both of which dominate courts and legislatures today. At the center of disputes like the Griswold, Auxier, and Sterling cases, and thousands of others like them, is a crucial philosophical conflict about the nature of individual freedom in the constitutional order. As long as lawyers and judges shun these profound questions, they will be unable to resolve these cases.
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