We have long known that self-set (i.e., Harberger) property taxes can not only lower the cost of making property trades, and discourage leaving properties idle, but can also serve as a substitute for eminent domain, wherein governments force sales at its-set prices in order to assemble large property packages. As with self-set taxes all properties have reasonable price offers, a buyer can suddenly buy a package at once.
Wouldn't it be far easier to make the asset I own (re my neighbours) also subject to self-set and let investors buy me off? Saves on having to buy the whole neighbourhood.
Obviously givethe owners the choice to either bundle all such assets with their property and self-set one price, or disentangle and set multiple prices
I'm confused about, "you should be legally allowed to remove or change any zoning restriction if you can get the consent of all owners of those other properties to which that restriction is owed." How many owners of the other properties are you imagining there would be? Every homeowner in a zone? It's impossible to get hundreds or thousands of homeowners to agree unanimously to sell their properties to an entrepreneur with the expectation of being sold them back after the zoning change. Even if the entrepreneur's zoning change idea is fantastic and obvious they'll be lucky to get 90% agreement. Because people aren't always rational or not everybody devotes the time to understand the deal.
It's the same problem as tragedy of the commons. In theory, the tragedy of the commons is fixable by having one entity buy up the commons from everyone with a right to it, and then make improvements that benefit all, and sell it back. In practice you can't get that level of agreement. (And each person using the commons has an incentive *not* to sell but still get the benefit of the improvements, if the improvements can't be limited to only those who sold, as is often the case.)
But is it really plausible that the zoning restriction on your property is owed to 100K properties? Is the way you use your property really substantially influencing that many other properties?
I said "hundreds or thousands," not "hundreds of thousands." I think it would be near-impossible to get a thousand independent homeowners to unanimously agree to a deal. Even if there's only 100, getting unanimous agreement is already very unlikely, even if the deal is really good.
Now I understand you. That does seem like a better idea.
However, the incentive is for each person to value their property for self-set taxes at a level high enough to cover the costs and effort of having to move out of their house if someone buys it. This would be a level higher than the price anyone *else* would buy the property for. So the resident's price P for his own property is higher than the best price P' the rest of the market is willing to pay. (Unless the resident's already ready to move out.)
So the entrepreneur buys the property at a price P > P', improves its value by c, and now wants to sell it back. The resident knows the best price the entrepreneur can get from the rest of the market is P' + c, and if P' + c < P, then the resident can demand a price below P which the entrepreneur has to accept or he loses even more money. The entrepreneur has thus lost money on the deal whoever he sells it back to.
This seems like a feature rather than a bug. If the value add of the zoning change (c) is less than the moving cost of the people who don't want the change (P' - market price), then the change should not happen.
If some of the affected owners would like the zoning change to happen, they could agree in advance to repurchase at P' as Robin suggests, or even more simply just consent to the zoning change without any need to sell their property. If people oppose the change but at a cost less than their moving cost, they could agree to be paid that compensation to consent to the change. self-set taxes really just come in for the people who claim that the zoning change imposes a huge cost on them, by capping that cost at their set property value.
"Is less than the moving cost of the people who don't want the change" - whether they want the change or not has nothing to do with it. In the scenario I set up, the resident agrees that the property value has increased by c; he wants the change. And yet, he has no incentive to reward the entrepeneur for making the change.
The other stuff you said has the same problem of unanimous agreement I described earlier. It is only self-set taxes that could potentially solve the unanimous agreement problem, but self-set taxes have the moving-cost problem.
“every zoning restriction on how a particular property can be used is an obligation to other particular properties within a limited spatial proximity of that first property. “
I think the legal term you are looking for is “easement”. A negative easement prevents the owners from doing certain things with their property without permission from the holders of the easement, say painting their house orange. A positive easement prevents the owners from excluding the holders of the easement from using the property is a certain way, e.g. using a path that crosses the property. Such easements can be created by enforceable contracts and traded, at least in theory. I’m not a lawyer or legal scholar, so I may have missed a detail. But this sounds a lot like the sort of non-general restriction you are describing.
That clearly applies to creation of new restrictions. When relaxing restrictions, the developers would need to buy easements from the existing owners, in effect the city council or zoning board, whoever created the regulations to begin with.
1) I don't think you include enough consideration to legal risk. What if the government changes the terms of how buyback or whatever works out from under you? There is very little protection for this kind of contractual arrangement unlike just directly owning your house.
2) I feel like if this proposal had a hope of being passed we'd have already been able to pass other zoning reforms. The problem is many voters *want* to stop other people from making mutually beneficial trades in their neighborhoods so they can influence/decide how the rest of the town looks and because they don't believe in basic economics. Adding these corporate forms that buy up a bunch of property only makes it worse.
Yes, I agree if your system was law then they'd be persuaded by the money.
But it's a reason not to vote in such a system because any money they might earn is very non-salient/unclear. Think of the political ads, they'll suggest that you won't really get any money from this and you'll lose control of your neighborhood to scary big corps. The average voter doesn't have a good way to distinguish between these competing claims.
I agree it's a nice solution assuming you have some kind of lock-in/judicial precedent to deal with 1. I'm just skeptical that it's likely to ever get adopted.
Then they can package obligations and self-set a value for the package. Being able to buy a package of rights that includes unnecessary ones would still be a big improvement.
There seems to be a slight Coasean problem with this set up: non-reciprocal nuisance bans. E.g. grade schools create problems for liquor stores in the sense of "Oh crap, they are building a grade school two blocks over, now my liquor store is illegal." Now, clearly this is a problem with the current Zoning regime as it stands, as certain land uses have sort of a presumptive right to impose restrictions on nearby land owners, but it seems like it is still a big issue here that isn't resolved except by buying out the land imposing the restrictions. I can imagine abusing such a system by setting my tax/buyout high, then building something that imposes great restrictions on those around me, forcing them to either radically alter their land use or buy me out at an exorbitant rate.
That said, your plan is almost certainly a large improvement to the status quo. I don't really have a great solution to the problem mentioned, other than standard rules about "You can't buy a place then complain about what was already there," and those are spotty in execution it seems.
Wouldn't it be far easier to make the asset I own (re my neighbours) also subject to self-set and let investors buy me off? Saves on having to buy the whole neighbourhood.
Obviously givethe owners the choice to either bundle all such assets with their property and self-set one price, or disentangle and set multiple prices
What you're proposing sounds similar to how covenants running with the land already work.
I'm confused about, "you should be legally allowed to remove or change any zoning restriction if you can get the consent of all owners of those other properties to which that restriction is owed." How many owners of the other properties are you imagining there would be? Every homeowner in a zone? It's impossible to get hundreds or thousands of homeowners to agree unanimously to sell their properties to an entrepreneur with the expectation of being sold them back after the zoning change. Even if the entrepreneur's zoning change idea is fantastic and obvious they'll be lucky to get 90% agreement. Because people aren't always rational or not everybody devotes the time to understand the deal.
It's the same problem as tragedy of the commons. In theory, the tragedy of the commons is fixable by having one entity buy up the commons from everyone with a right to it, and then make improvements that benefit all, and sell it back. In practice you can't get that level of agreement. (And each person using the commons has an incentive *not* to sell but still get the benefit of the improvements, if the improvements can't be limited to only those who sold, as is often the case.)
But is it really plausible that the zoning restriction on your property is owed to 100K properties? Is the way you use your property really substantially influencing that many other properties?
I said "hundreds or thousands," not "hundreds of thousands." I think it would be near-impossible to get a thousand independent homeowners to unanimously agree to a deal. Even if there's only 100, getting unanimous agreement is already very unlikely, even if the deal is really good.
But with self-set taxes it is possible to get a single buyer to just buy 1000 properties.
Now I understand you. That does seem like a better idea.
However, the incentive is for each person to value their property for self-set taxes at a level high enough to cover the costs and effort of having to move out of their house if someone buys it. This would be a level higher than the price anyone *else* would buy the property for. So the resident's price P for his own property is higher than the best price P' the rest of the market is willing to pay. (Unless the resident's already ready to move out.)
So the entrepreneur buys the property at a price P > P', improves its value by c, and now wants to sell it back. The resident knows the best price the entrepreneur can get from the rest of the market is P' + c, and if P' + c < P, then the resident can demand a price below P which the entrepreneur has to accept or he loses even more money. The entrepreneur has thus lost money on the deal whoever he sells it back to.
This seems like a feature rather than a bug. If the value add of the zoning change (c) is less than the moving cost of the people who don't want the change (P' - market price), then the change should not happen.
If some of the affected owners would like the zoning change to happen, they could agree in advance to repurchase at P' as Robin suggests, or even more simply just consent to the zoning change without any need to sell their property. If people oppose the change but at a cost less than their moving cost, they could agree to be paid that compensation to consent to the change. self-set taxes really just come in for the people who claim that the zoning change imposes a huge cost on them, by capping that cost at their set property value.
"Is less than the moving cost of the people who don't want the change" - whether they want the change or not has nothing to do with it. In the scenario I set up, the resident agrees that the property value has increased by c; he wants the change. And yet, he has no incentive to reward the entrepeneur for making the change.
The other stuff you said has the same problem of unanimous agreement I described earlier. It is only self-set taxes that could potentially solve the unanimous agreement problem, but self-set taxes have the moving-cost problem.
“every zoning restriction on how a particular property can be used is an obligation to other particular properties within a limited spatial proximity of that first property. “
I think the legal term you are looking for is “easement”. A negative easement prevents the owners from doing certain things with their property without permission from the holders of the easement, say painting their house orange. A positive easement prevents the owners from excluding the holders of the easement from using the property is a certain way, e.g. using a path that crosses the property. Such easements can be created by enforceable contracts and traded, at least in theory. I’m not a lawyer or legal scholar, so I may have missed a detail. But this sounds a lot like the sort of non-general restriction you are describing.
Yes, I want zoning restrictions to be formally converted in the eyes of the law into easements.
Such easements could be created and traded without requiring property owners to sell and re-buy the affected property.
That clearly applies to creation of new restrictions. When relaxing restrictions, the developers would need to buy easements from the existing owners, in effect the city council or zoning board, whoever created the regulations to begin with.
I think this proposal has 2 major difficulties.
1) I don't think you include enough consideration to legal risk. What if the government changes the terms of how buyback or whatever works out from under you? There is very little protection for this kind of contractual arrangement unlike just directly owning your house.
2) I feel like if this proposal had a hope of being passed we'd have already been able to pass other zoning reforms. The problem is many voters *want* to stop other people from making mutually beneficial trades in their neighborhoods so they can influence/decide how the rest of the town looks and because they don't believe in basic economics. Adding these corporate forms that buy up a bunch of property only makes it worse.
They may "want" restrictions, but how much are they willing to pay for them?
Yes, I agree if your system was law then they'd be persuaded by the money.
But it's a reason not to vote in such a system because any money they might earn is very non-salient/unclear. Think of the political ads, they'll suggest that you won't really get any money from this and you'll lose control of your neighborhood to scary big corps. The average voter doesn't have a good way to distinguish between these competing claims.
I agree it's a nice solution assuming you have some kind of lock-in/judicial precedent to deal with 1. I'm just skeptical that it's likely to ever get adopted.
Each obligation should have its own self-set value for tax purposes and be subject to a line-item buyout without buying the underlying property.
What if there are package values for obligation packages on a property?
Then they can package obligations and self-set a value for the package. Being able to buy a package of rights that includes unnecessary ones would still be a big improvement.
There seems to be a slight Coasean problem with this set up: non-reciprocal nuisance bans. E.g. grade schools create problems for liquor stores in the sense of "Oh crap, they are building a grade school two blocks over, now my liquor store is illegal." Now, clearly this is a problem with the current Zoning regime as it stands, as certain land uses have sort of a presumptive right to impose restrictions on nearby land owners, but it seems like it is still a big issue here that isn't resolved except by buying out the land imposing the restrictions. I can imagine abusing such a system by setting my tax/buyout high, then building something that imposes great restrictions on those around me, forcing them to either radically alter their land use or buy me out at an exorbitant rate.
That said, your plan is almost certainly a large improvement to the status quo. I don't really have a great solution to the problem mentioned, other than standard rules about "You can't buy a place then complain about what was already there," and those are spotty in execution it seems.