James W. Ely, Jr., Buchanan and the Right to Acquire Property
, __ Cumberland L. Rev.
__ (forthcoming), available at SSRN
Can property rights really exist if we do not have a right to acquire property?
When we hear about debates over property rights, they are often about the claims of people who already own property. The focus is on how owners can use property and what regulations the state can place on the use of one’s property. We often lose sight of perhaps a more fundamental set of questions about how we protect, facilitate, and pave the way for earning the means for the acquisition of property.
Only if one can acquire property do any of those other questions even matter. We first need to ensure that people have an equal opportunity to acquire property and become owners. Property rights issues related to possession and use only becoming relevant thereafter. Professor James Ely’s recent work, Buchanan and the Right to Acquire Property, reveals this important lesson: the debate over what property owners can do with property is of little consequence if we do not first resolve the debate over whether individuals have a right to acquire property and how that right is supported.
Professor Ely’s article takes readers on a precedential tour through important jurisprudential moments too often neglected. He starts with the 1917 opinion by the U.S. Supreme Court in Buchanan v. Warley. Ely explains how the Buchanan Court—long before more well-known anti-segregation rulings like Brown—used the right to acquire property as the arrow for slaying a Louisville ordinance that prevented individuals from occupying property in areas dominated by occupants who were not of their race.
Buchanan, Ely recalls, was responsible for halting the progress of racial segregation movements in many cities. Nonetheless, he speculates that the case became a “constitutional orphan” because its property-rights focus made it an “awkward fit for post-New deal constitutionalism” while similarly interfering with and becoming eclipsed by the agenda of Progressives interested in planning and land use controls. (P. 1.)
Ely’s article is notable and worth reading for its retelling of the Buchanan precedent and for its tutorial on the development of the “right to acquire property” in various state and federal cases both before and after Buchanan. He explains that these cases were especially helpful at empowering the poor and minorities because the right to acquire rationale was focused on equalizing them in the marketplace. The later shift toward economic regulation—instead of rights—as a vehicle for social change, Ely laments, proved to be more beneficial to those who engage in rent-seeking to concentrate benefits upon certain interest groups than helpful to the individuals for whom such regulations were purportedly targeted.
Ely’s article is also an important contribution beyond simply the history of Buchanan and the right to acquire, because it traces two interconnected jurisprudential lines of inquiry in state and federal courts. His history reveals a key understanding within state and federal court opinions in the late 1800s and early 1900s—a realization that individuals cannot enjoy a right to acquire property if they are unable to acquire the means necessary to purchase property.
In other words, there must be a right to pursue a lawful calling if the right to acquire property is to be protected. Individuals must be able to use their comparative advantage in the marketplace to earn a living so that property acquisition is an attainable end. In fact, perhaps one of the reasons that the right to acquire property has not survived in a robust independent line of precedent is that by the early twentieth century the “right to acquire property had been as a practical matter folded into the right to pursue lawful callings.” (P. 11.)
Ely concludes with some comments on the modern relevance and renewed importance of understanding these historical lines of jurisprudential thought. Recent debates on occupational licensing requirements are drawing on the right to pursue lawful calling precedents and should be informed by the immediate impact the decisions in this space have on the correlated right to acquire property.
Individuals are prevented from meaningfully accessing the marketplace for property if they cannot meaningfully access the market for occupational development to earn a living. We too often see these issues as silos, looking at the costs and benefits of regulating workplaces or protecting consumers by requiring individuals to obtain licenses before they can work, and then looking independently and having separate debates on how we regulate property and make housing more affordable.
Ely’s work reminds us that there was a time when the courts understood the key interdependent relationship between acquiring property and maintaining an occupation, or calling, of one’s choice. A marketplace, and legal structure facilitating it, that allows individuals to exploit their comparative advantage in the occupational marketplace empowers them to obtain the means for acquiring property so long as the law also does not place any artificial and discriminatory barriers to such acquisition.
Beyond licensing, readers of Ely’s work on the right to acquire will leave it with a newfound appreciation for what should be an obvious point—we cannot enjoy what we cannot access. And no matter how much we improve the quality of certain assets—like the qualities of owners’ rights—they remain meaningless if some people are shut out from the ability to acquire them. Rights to acquire are a prerequisite to the value of a property system.
Most directly, Ely’s work provokes some fundamental questions that all readers will be eager to explore. What responsibility does the state have to create market conditions in which the acquisition of property is a real possibility? What duty does the state have to empower acquisition or at least remove artificial barriers to it?
Undoubtedly, the realization regarding the role that the right to acquire must play in property systems can lead to differing policy prescriptions regarding the proper means for facilitating access to property and empowering acquisition.
Not everyone believes, as Ely seems to, that the best way to achieve these things will be for the removal of legal constraints on pursuing lawful callings, enforcement of non-discrimination principles, and invalidation of state-conferred monopolies. Others will no doubt think the state needs to take a more interventionist role.
But either way, Ely’s article should be a catalyst for debating the right to acquire and revisiting its jurisprudential foundations whenever we are confronting myriad modern-day property controversies—including land use, zoning, housing affordability, homelessness, continuing issues of racial segregation, and others.
“Inclusion” is one of those words that typically elicits warm and positive feelings. However, when an entire society is described as “inclusive,” the question arises—included in what? Putting the question another way, is it even possible for a community be all-inclusive?
Often, contemporary American political and legal discourse draw Manichaean distinctions between advocacy of inclusivity and of xenophobia. With regard to land use and housing issues, complete racial and socioeconomic integration of neighborhoods thus are juxtaposed against sinister demands by NIMBYs, who demand that integration take place “not in my back yard.”
Professor Kenneth Stahl is both an advocate for inclusion and an opponent of easy over-simplification. His analyses of economics, sociology, and political theory in The Challenge of Inclusion led him to observe that, at a fundamental level, the problem resides in the very notion of “community” itself.
I argue that the NIMBY is not the principal barrier to creating inclusive communities. Rather, the very notion of community, however broadly conceived, depends on exclusion. As the theorist Michael Walzer wrote, if communities lacked the ability to exclude, they could not maintain the very thing that makes them communities: their character as “historically stable, ongoing associations of men and women with some special commitment to one another and some special sense of their common life.” The perceived selfishness of the NIMBY is an outward manifestation of this deeply embedded and widely shared desire to preserve community. Therefore, even if NIMBYism could be excised, the challenge of inclusion would remain. (P. 492.)
In particular, Stahl added, sociologists have demonstrated that a system of shared norms enforced by exclusion “enables people to survive in an impersonal urban ‘world of strangers.’” (P. 502.) Beyond that, he reiterated Elinor Ostrom’s findings that strong community oversight could substitute for private ownership: “[W]ell-organized communities with strong collective social norms can develop effective cooperative systems for sharing common resources without private property or government intervention.” Furthermore, these shared social norms “can only exist where communities strictly exclude outsiders.” (Pp. 499–500.)
Affluent political progressives willingly pay taxes for social services for the less fortunate. However, they are unwilling to give up exclusionary zoning in their own neighborhoods, which protects their property values and exclusive access to superior schools that provide their own children with entrees to elite colleges and subsequent advantages in life. In his recent book Dream Hoarders, Richard Reeves points out that Americans less frequently refer to themselves as “middle class,” and more as “lower middle class” or “upper middle class,” which he defines as the top 20 percent of the income distribution, less the top 1 percent. Affluent professionals and managers are growing in wealth and power, and, through exclusionary zoning, Section 529 plans for tax-free college savings, and the like, increasingly seem to be perpetuating a class apart. This growing demographic seems more intent on hoarding opportunities than on inclusivity.
Stahl, on the other hand, declared that “inclusion represents our society’s highest aspiration,” and it has attempted the complicated task, as he puts it, of creating communities that are both “diverse and inclusive.” (Pp. 487–88.) He observed:
“[D]iverse communities practice exclusion in much the same way homogeneous communities do, just at a different scale. Arguably, moreover, these diverse cities could not remain diverse without being exclusive at the neighborhood scale. . . . One way to reverse th[e] pattern of suburban migration and maintain a diverse city, however, is to unbundle residence from public goods and services so that individuals can choose their preferred package of municipal amenities while remaining within the city. This is precisely what exclusionary mechanisms like private schools, BIDs, and neighborhood zoning are intended to accomplish. (P. 525.)
Professor Stahl’s concrete suggestions involve compromise, thus furthering inclusion while permitting a sustainable amount of differentiation. This “municipality as a federation of neighborhoods” approach includes mechanisms for limited local management of public goods and to permit development that falls short of the inclusionary ideal. An example of the latter is the luxury apartment building which includes government-subsidized units for those with low- and moderate-incomes, the latter with separate side-street entrances and lobbies (assailed by critics as “poor doors”). This, Stahl argues, gives the poor ready access to the employment, educational, and cultural amenities of affluent neighborhoods, while assuring their affluent neighbors that “increasing diversity in their neighborhood need not lead to a tipping point of decline.” (P. 531.)
Likewise, private schools and charter schools would preserve the link between schools and residential neighborhoods, while at the same time providing a comforting option to the well-off, while also providing lower-income families some access to schooling in other areas.
Stahl understands and accepts that his approach will face substantial criticism: “As a normative matter, the idea of the diverse city as a federation of neighborhoods conflicts with a perhaps more conventional view of diversity as integration at the granular level. The federation of neighborhoods is not a recipe for mutual understanding or deep meaningful interactions between diverse groups of people. To the contrary, it accepts separation as the price of inclusion.” (P. 527.)
In an era of increased political polarization, Professor Stahl’s approach will not fully satisfy many. Yet it facilitates the kind of compromise between diverse groups that may, in the long run, best advance the cause of inclusive housing and inclusive communities. For this reason, The Challenge of Inclusion is an analysis and a set of prescriptions deserving of close attention.
Robert C. Hockett & Roy Kreitner, Just Prices
, 27 Cornell J.L. & Pub. Pol’y
(forthcoming 2018), available at SSRN
Our economic system, and particularly our laws of property and contracts, assumes that prices arise naturally from the workings of a neutral market. Rational actors with complete information operate independently, and the laws of supply and demand establish a unique price for a good or a service. The market price established in this manner reflects the value of that good or service. If these assumptions are correct, then one may conclude that the price of any item is “just” in the sense that it reflects the value the relevant market places on it and conveys this information to those operating within that market.
Robert Hockett and Roy Kreitner challenge this conclusion by questioning the assumptions that underlie it. For instance, some market actors do not act independently of each other, and coordination may lead to price distortions. More significantly, the rules of trade are not neutral but rather reflect choices that import values of their own. The fact that the assumptions underlying the supposed justice of prices are questionable does not necessarily lead to pricing that is unjust. But this fact should cause us to question whether and when prices are just. The authors seek to propose factors that can help us decide the justice of particular prices.
Hockett and Kreitner begin with a brief review of the early economic literature, which largely argued that competition will lead to fair wages and prices. Some economists questioned those conclusions even then, recognizing that land and other assets were held unequally and that those who possessed a disproportionate quantity of these assets could have a greater effect on prices. Such a system might maximize wealth without maximizing distributive justice. But the early consensus seems to have been that a disorganized and decentralized system is neutral and will lead to prices that are just.
The authors challenge the assumptions of these early economists. The supposedly neutral exchanges that create prices are the products of the laws of property and contracts, which themselves are not neutral. This means that “[p]rices do not ‘just happen.’” (P. 12.) Rather, decisions we have made in the past influence prices. The government, by adopting zoning and intellectual property laws, affects prices. The monetary and tax systems are controlled by the government. “In short, the price system is deliberately engineered rather than spontaneously generated.” (P. 14.)
Returning to the question of unequal resource distribution, Hockett and Kreitner remind us of the injustices inherent in our markets. Some people are at a disadvantage because they possess little property or none at all. And, according to the authors, some market exchanges that proceed should be banned: They raise the examples of sales of bodily organs and the use of child labor. The occurrence of such transactions has ripple effects throughout the market, with the price of a good for sale in one location perhaps artificially reduced by the child labor that helped produce one of its components somewhere else.
One other assumption – that of rational actors with full information – is undercut by the regular recurrence of market bubbles, runs on banks, and hyperinflation. These illustrations demonstrate that markets are not always self-correcting, at least not right away. And any interventions imposed by government in response to these irrationalities will further distort pricing.
Given that private coordination and public intervention in the market occur regularly, it is inaccurate to describe markets as neutral and uncoordinated. Does this inevitably lead to prices that are unjust? The answer will depend on the context. To begin, we must acknowledge the prevalence of these types of intervention. We also must recognize that this quiet participation in the market can hide “sub-rosa decisions with regressive implications.” (P. 21.) The authors proceed to describe settings in which a more active intervention in the market to influence prices may be warranted to enhance justice.
After briefly discussing drug prices and public benefits, Hockett and Kreitner conclude with a discussion of retirement funds. The move to defined-contribution plans in recent decades may have increased total returns, but these improvements have come at the cost of greater volatility for investors. Perhaps, the authors argue, investment in local projects that produce lower returns but greater intangible benefits might be preferable. The local community will benefit from the investment. The investor, meanwhile, will enjoy the intangible benefits that come from enhancement of the community, along with reduced portfolio volatility, at the cost of slightly lower returns.
Much of the literature on property law relies, perhaps not explicitly, on the assumption of rational economic actors transacting in a neutral market. By reminding us that this economic model does not always reflect how actual market participants behave, Hockett and Kreitner emphasize that the conclusions we draw from these presumptions are not always accurate. They do not seek to demolish the traditional model, which is well-entrenched in the literature. Instead, they ask us to question when the model is least likely to reflect the reality of how true market participants behave.
In some settings, creative use of the pricing system may allow us to attain desirable goals. But even more important than that, as the authors note in closing, is acknowledging the reality that prices are not any more just than the social relations from which they spring. “That means our efforts to improve the latter will proceed in tandem with our efforts to improve the former.” (P. 27.)
Cite as: Gregory M. Stein, Are Prices Just?
(June 5, 2018) (reviewing Robert C. Hockett & Roy Kreitner, Just Prices
, 27 Cornell J.L. & Pub. Pol’y
(forthcoming 2018), available at SSRN), https://property.jotwell.com/are-prices-just/
As the United States Supreme Court said in 1979 and restated in 1982 and then restated again in 2002, “‘the right to exclude others’ is ‘one of the most essential sticks in the bundle of rights that are commonly characterized as property.’” Just as the bundle of sticks metaphor has become ubiquitous and virtually indispensable to the definition of real property, so too has the right to exclude become essential to the idea of the assemblage of rights and things that constitute real property. Katrina M. Wyman, in her article Limiting the National Right to Exclude, challenges her reader “to rethink the robustness of the right to exclude that states currently enjoy” against the challenges to human mobility that she believes climate change will generate for millions of people. (P. 459.)
Regardless of one’s position regarding climate change, Wyman draws her reader into a compelling “what if” conversation. What if the earth’s physical environment is changing such that, in a relatively short period of time, land that is currently inhabited will become uninhabitable, either because of sea level rise or because of increasingly high temperatures? How should we understand the prospects of individuals and cultures that become dispossessed under such scenarios?
Wyman is willing to imagine curtailing the rights of sovereign states to exclude foreigners under the circumstances mentioned above. She discusses three categories of recognized limitations on the rights of private landowners to exclude and considers how they inform a discussion of the degree to which states’ rights to exclude foreigners can or should be curtailed.
The first of the three categories involves necessity-based limits, pursuant to which a private landowner’s right to exclude must give way, in cases of imminent danger, to the right of others to enter the landowner’s property to save their own lives or property. (P. 440.) If private rights must yield to great public welfare concerns in the private landowner context, Wyman argues, these same public welfare concerns may “override the right of states to exclude foreigners in peril.” (P. 442.)
The second category of limitations on the rights of landowners to exclude is anti-discrimination limitations in the public accommodations area. (P. 445.) Title II of the Civil Rights Act of 1964 is the private analog of the state as the quintessential “‘public accommodation’ because [states] open their borders for trade, including trade with other nations and foreigners who travel to buy and sell goods and services, and for tourists to simply visit.” (P. 447.) Thus states seem no different from their private counterparts in this category and should have similar limits on whom they must accept and serve.
The third and final category of restrictions on the private landowner’s right to exclude that Wyman offers is eminent domain, the power of the government to take private property for a public use upon the payment of just compensation, pursuant to the Fifth Amendment of the United States Constitution. (P. 452.) Wyman concedes that no comparable right empowers one state to forcibly transfer the land of another sovereign. She also acknowledges that the idea of such forcible transfers is a “highly objectionable throwback to the era of European colonization….” (P. 453.) But, Wyman engages the work of scholars who support a right of partial displacement of existing countries from some of their territories by societies that are rendered refugees as a result of climate change.
Wyman’s normative contribution is to invite her reader to consider the possibility of shifting towards a framework of greater human mobility across national borders, and perhaps even open borders. What is exciting about Wyman’s contribution is that she has taken such a historic concept, the right to exclude, and has offered a new way of approaching it.
I began my 1L property class this semester with Johnson v. M’Intosh. One of the lessons of this iconic case is that “[a]n absolute [title], must be an exclusive title, or at least a title which excludes all others not compatible with it.” I am excited to share Wyman’s article with my students and to challenge them to experience the historic concept of the right to exclude in a fresh and new way, in a way that grapples with challenges and opportunities of the twenty-first century.
Maureen E. Brady, The Damagings Clauses
, 104 Va. L. Rev.
(forthcoming 2018), available at SSRN
In her article, The Damagings Clauses, Professor Molly Brady comprehensively analyzes provisions known as “damagings clauses,” which twenty-seven states have enacted in their constitutions. Her work explains the history of their enactment, the courts’ interpretation of these clauses over time, and the potential for reenergizing these constitutional claims to address governmental damages and injuries to property owners that takings jurisprudence or the common law may not otherwise remedy.
Professor Brady’s stated goals for the article are to persuade readers that “there is a place for damagings within condemnation law, that this neglected constitutional provision has the capacity to address a confusing and undertheorized gap in the application of the compensation requirement, and that courts have lost sight of the language’s history in narrowly construing it.”
She has certainly persuaded this reader, and I encourage anyone working in eminent domain law, regulatory takings law, or property law to read this article.
I am embarrassed to say that, even if I had heard about state damagings clauses in the past (which I do not recall), I have never paid any attention to them until I read Professor Brady’s draft paper last year for the Property Law Works in Progress session at the AALS Annual Meeting in San Francisco. Please read this article so you will not be similarly embarrassed in the future, as I anticipate that scholars and litigants will be hearing more about these clauses in response to projected infrastructure growth.
As Professor Brady sets out in a heavily researched history of the beginning of these clauses, Illinois was the first to adopt a damagings clause into its state constitution in 1870 to address a gap in condemnation law “during controversies over street grading and railroad construction.”
Brady expresses this gap as one in which property owners experience a diminution in the value or usefulness of their property as a result of government action that does not take, occupy, or regulate their particular property but that does substantially impair their property interest and should require compensation based on principles of fairness and justice.
The Court in Lucas v. South Carolina Coastal Council expressed this gap as the “gross disparity” between the landowner whose property is taken by eminent domain to build a highway and the landowner who has suffered a ninety-five percent loss in value from the government’s nontrespassory and nonregulatory actions that are not compensable.
Professor Brady notes that “long before regulatory takings were even conceived of as a category, hundreds of lawyers in jurisdictions across the country worried about the fact that physical takings might not cover all the activities of government affecting land for which compensation should be required,” and they moved to address this problem through state constitutional changes.
The article provides many examples of government actions such as alterations in the landscape to accommodate railroads where nearby “homes [were] either left in midair or buried by mountains of dirt filling in the streets.” Because these actions did not appropriate or occupy land, they were noncompensable even though they destroyed property values or caused the ouster of the landowner.
The language of the state damagings clauses adopted in response to these noncompensable actions varies among the states. However, most states have adopted the language used by either Illinois or Pennsylvania. Illinois in 1870 constitutionalized the principle that “Private property shall not be taken or damaged for public use without just compensation.” In its 1874 constitution, Pennsylvania provided:
Municipal and other corporations and individuals invested with the privilege of taking private property for public use shall make just compensation for property taken, injured or destroyed by the construction or enlargement of their works, highways or improvements, which compensation shall be paid or secured before such taking, injury or destruction.
The damagings clauses offer the opportunity for both professors and practitioners to address the “gross disparity” that has existed in takings jurisprudence between landowners who are the target of condemnation or confiscatory regulation and nearby landowners who experience the devaluation or destruction of their property interests from what Abraham Bell and Gideon Parchomovsky have described as “derivative takings.”
Professor Molly Brady’s excellent article is not only a “must-read” for purposes of understanding “these forgotten provisions of the state constitutions,” it also presents some intriguing discussions of the relationship of nuisance law to the interpretation of these clauses and takings jurisprudence.
Laura Underkuffler’s recent article, Property, Sovereignty, and the Public Trust, is part of a special issue of Theoretical Inquiries in Law. The collection as a whole is an important read for anyone interested in the relationships between individual property rights claims and the role and remit of the state in the “private property” sphere. The twelve articles collected in the special issue offer insightful and wide-ranging contributions to these important debates and, both individually and collectively, will hold much interest for Property section readers.
Underkuffler’s contribution examines the theoretical basis for what she describes as the ubiquitous assumption in liberal democratic systems that government should forbear from interference with existing individual property entitlements. Her starting point is the sovereign’s duty to respond to the needs of all members of its community, and from this position she describes the concept of forbearance as “an inherently troublesome proposition.” (P. 330.)
In the course of the article, she examines the core arguments of conventional theories of government forbearance from interference with existing individual property entitlements—for example, for protecting individual reliance interests, or for public policy reasons like encouraging investment or enhancing social stability, or through the tautology that the idea of property itself determines the requirement of government forbearance.
Yet, Underkuffler concludes that each of these arguments offers insufficient reasons, on its own terms, to adequately explain the “forbearance phenomenon.” She offers an alternative lens through which government forbearance can be explained, rooted in the “fiduciary relationship” between a government and its citizens. Fiduciary theory offers an interesting frame for thinking about the structured, institutional, hierarchical power dynamics of relationships between the state and its citizens, and offers a fresh concept for giving content to the state’s responsibilities towards property owners.
Crucially, this fiduciary duty applies not only to property owners but to all citizens. Through this move, Underkuffler repositions the same state obligation that mandates government forbearance from interference with individual property rights on the basis of potentially overreaching power as also applying to non-owners. By widening the population to whom this state duty is owed to include all citizens, Underkuffler shifts the focus away from whether the state should act with respect to private property, to how the state should carry out its all-citizen duty.
Her answer, applying Evan Fox-Decent’s theory of “the state as fiduciary,” focuses on the fiduciary’s responsibility to be “other-regarding” and “to act with due regard for the [beneficiary’s] best interests.” (P. 346.) In this context, the “beneficiaries” of the state’s power include all individual citizens, and the existence of the fiduciary duty demands that “government at the very least must engage in serious reckoning with individual citizens’ (as well as collective) interests.” (Id.)
Through this move, Underkuffler extends the property/sovereignty debate beyond the state-owner binary, to take account of the interests of other members of the community, who live “outside the bubble” of property ownership. She is careful to emphasize that this does not imply that the interests of private property owners should not be valued and protected by government forbearance; indeed, she argues that the individual interests of property owners “must be considered, seriously, in sovereign decision-making.” (Id.)
Nevertheless, her approach opens up space for arguing that—where these individual property-owning interests conflict with collective interests—the individual claim will not, and should not, always prevail. Through the fiduciary lens, Underkuffler simultaneously recognizes the government’s obligation to check its potentially overreaching powers with respect to property owners, and that:
Fiduciaries, by reason of the demands of the fiduciary obligation, are obligated to all of their beneficiaries equally. There is no basis, in fiduciary theory, to rule in – at the outset – the claims of some beneficiaries, and to rule out the claims of others. Government as a fiduciary must reckon seriously not only with the needs of its beneficiaries who own property, but also with the needs of those who do not.
The idea that the state acts under a duty to give “serious reckoning” to competing claims is not unknown in property systems beyond the United States.
Underkuffler refers to the framework constructed under the South African Constitution of 1996 (P. 352) for the purposes of enabling the newly remade state to carry out this duty, and to the national constitutional provisions adopted in Germany after reunification in 1989 (Pp. 351-52).
Indeed, the case law triggered by property reallocation following German reunification included a further test of the “fair balance” struck by the German state when the dispossessed owners appealed to the Grand Chamber under Article 1 of the First Protocol to the European Convention on Human Rights, with that court concluding (in the exceptional circumstances of reunification) that the “deprivation” of property without compensation was in accordance with law, “in the public interest,” and had struck a fair balance between the general interests of the community and the requirements of the protection of individual rights. Underkuffler describes these balancing processes—between the interests of property owners and “the public interest”—as a “public-fiduciary” approach.
In seeking to “illuminate the fuller context in which these questions arise” (P. 353), Underkuffler emphasises the importance of the property resource to human life:
Of all conceivable human interests, none is more fundamental than the ability to appropriate and retain property. It is a stark biological fact that of all commonly asserted human rights, property claims are among the most essential to human life…the ability to live – and to appropriate property to do so – is assumed by any other human right of which we can conceive. When it comes to property, the stakes could not be higher. In other words, government forbearance towards existing property entitlements is rooted in property’s substantive function, and its required guarantees.
(P. 347, emphasis in original.)
As the passage above demonstrates, Underkuffler moves among property-as-resource, property claims, and property rights, while also touching on the suggestion that property (in the form of property rights) is the “guardian” of other human rights—a proposition that has been challenged in debates about the relationship between the right to property and other (human) rights claims. For example, Andre van der Walt, writing from the South African context, argued that property is not “the saviour, the knight on the white steed, the guardian of every other right,” and that positioning property law in that guardian role makes property—and property rights – too central to debates about the governance of property-as-resource in the interests of the whole community. It will be interesting to track how this crucial distinction is advanced in future scholarship developing the “state-as-fiduciary” approach to property and sovereignty.
Underkuffler’s article—and this special issue as a whole—is likely to be of considerable interest to property scholars, and to provoke much further discussion—within the United States and beyond—about the frameworks we use to think and talk about the relationship between owners and non-owners, and the role of the state in governing the valued resource of property in the public interest.
Property scholars have neither forgotten nor ignored the government’s role in creating and furthering racial segregation. Scholars have written extensive work on redlining, racially restrictive covenants, the siting of public housing in minority poor communities, and the resistance of wealthier white towns to affordable housing.
Nevertheless, Richard Rothstein’s book, The Color of Law, should be required reading for property scholars and students. Beautifully written, the book is packed with new details and stories that illustrate the many ways government—at the local, state, and federal levels—denied African-Americans equal access to space and property.
Rothstein’s goal is to convince readers that contemporary segregation is not the result of market forces but reflects the operation of de jure segregationist policies. Using historical research showing the racial animus of policymakers, The Color of Law connects historical examples of segregation drawn explicitly along racial lines with segregation accomplished through supposedly race-neutral guidelines such as single-family zoning.
As Rothstein shows, when the Supreme Court disallowed localities from explicitly denying African-American families a right to live in protected white communities, cities responded by both ignoring the Supreme Court’s commands and by adopting policies that, while not racist on their face, shared the same motivation.
I first approached The Color of Law as a chore. As someone who writes about race and property, I felt I compelled to read the book, but my expectations were low. Even if the American public does not appreciate the way in which Home Owners’ Loan Corporation appraisals combined with Federal Housing Administration lending practices in support of the white middle class and discriminated against African-American families, countless law review articles already tell that story. But The Color of Law not only makes that story come alive by showing how government policy blocked particular African-American families from acquiring property they could afford, but it also shows how a web of other policies contributed to segregation.
Borrowing a page from Jedediah Purdy’s move in The Meaning of Property to look at labor law through a property lens, Rothstein shows how government-supported employment discrimination suppressed incomes and made it much more difficult for African-Americans to acquire property. The Color of Law also highlights the ways white communities used violence, with the approval, and oftentimes involvement of, their local governments, to push out African-Americans.
Some areas that we now consider “white” are that way today because they adopted sundown policies, which forbade African-Americans “from residing or even from being within town borders after dark.” (P. 42.) When African-Americans sought to integrate neighbors—such as in Levittown, New Jersey and Richmond, California—white mobs harassed incoming black families mercilessly.
Even though such mob violence is often not thought of as government action, as Rothstein argues, when police officers support the mob and fail to check those officers or prosecute white rioters who threaten African-American homeowners, such behavior cannot be written off as “rogue actions” but instead amounts to state policy. (P. 142.) The attention in recent years to disproportionate targeting of African-Americans by police for scrutiny and violence only serves to underline the importance of Rothstein’s argument that, though segregation can appear to be the result of individual choices, it instead has a de jure character.
The only real concern I had when reading The Color of Law is that of readership. The book seems destined to be read by those already prepared to accept its central argument and never opened by those who prefer to ignore the inexorable link between race and property.
The Color of Law is not the first book to highlight the ways that today’s segregation and wealth disparities are the result of past government action. But its vivid details and quality writing makes The Color of Law worth the attention of those already familiar with the major issues and, most importantly, of those who prefer to put blinders on when it comes to race as they think and write about property.
Many first-year property classes start with the centuries-old Johnson v. M’Intosh (1823). There, Chief Justice John Marshall declared that the Indians were but occupants on their ancient lands, subject to the Europeans’ ownership, which was founded upon their “discovery” of America. Apart from general musings on the fairness and cogency of this ruling, property professors mostly leave the discussion of Indian land law and how it developed over time for another day and another course.
Professor Shoemaker’s article, Complexity’s Shadow: American Indian Property, Sovereignty, and the Future, reveals how Indian land law, despite its complexity, is a brilliant construct for teaching traditional property concepts such as the system of land tenures as well as property’s limits and justifications. It is also well-suited to understanding other doctrinal topics such as the regulatory state, decedents’ estates, and torts.
Why is Indian land law not embraced in the first-year property course? It could be that it is too obscure and too costly to understand and to rationalize. Unlike property law as it applies to non-Indians, landowners in Indian land law do not benefit from the historical presumptions in favor of well-marked interests and rights. Professor Shoemaker reveals that Indian land law imposes not only costs associated with understanding the rules that limit transfers and use of Indian property, but also demoralization costs when those limits do not accord with tribal interests, either societal or economic. She states “[c]omplexity has an obscuring, shadowing effect. Indian land tenure is so complex that it has been difficult to see all the intricacies happening inside.” (P. 544.)
Professor Shoemaker analyzes the complexity of Indian land law under a four-component framework — institutional differentiation, technicality, density, and indeterminacy. First, the system is institutionally differentiated because multiple legal regimes and jurisdictions make up the decision structures. The Indian land system has at least three legal regimes that apply, federal, state, and tribal. Additionally, there are several systems of land tenure: trust property (individual and tribal); fee ownership (by Indians and non-Indians); and “emulsified” (having attributes of both). All have varying degrees of rights and limits on autonomy. And, sometimes all reside within the same reservation and between co-owners.
Second, in Indian land law, technicality in the rules adds to complexity. An ever-growing bureaucracy must approve all transfers, even as to the right of a co-owner to sole possession and as to tribes conveying “fee-like” interest to members.
Third, density of rules also adds complexity. Concepts are defined by and are peculiar to Indian lands, leading to high information costs with the concomitant effects on access to capital.
Finally, the above factors combine in Indian land law to make otherwise basic areas of property law very uncertain. As the degree of uncertainty in the laws increases, so does the difficulty of predicting outcomes.
Professor Shoemaker shows how piecemeal congressional measures over time have not worked to fix the problem, but to exacerbate it. Limits imposed on transfers by devise, measures to define eligible heirs, and measures to define the nature of life estates have failed, largely because the definitions did not accord with intra-tribal relations and were just too cumbersome. Even some well-conceived state initiatives have been frustrated by the need to obtain the Secretary of Interior’s approval. Examples include statutes intended to:  acknowledge tribal rights to implement binding agricultural resource management plans on Indian trust lands;  pass tribal probate codes; and  allow more flexibility in the leasing of tribal trust lands.
In the end, Professor Shoemaker indicts the Indian land law system as “insidious.” It goes against all the received justifications for private property. First, it does not preserve Indian land; under the failed allotment program, Indians lost some fifty million acres of land by transfers to non-Indians. Second, Indian land law also does not facilitate human flourishing; the lack of control under the system discourages economic and personal investment. Third, it is not utilitarian. The non-navigability of the law of trust property results in more than half of trust property sitting idle and unproductive. At the same time, Indians suffer from high rates of poverty and low rates of homeownership; all the while government bureaucracy grows.
In Prof. Shoemaker’s view, the top-down controls cannot be justified by the claimed rationales. Protection against state imposition on Indian lands does not require limits on tribal authority, only against states. The current land tenure system does not constrain fee owners, even those residing on reservations, because of the different treatment of fee property as opposed to trust property. Nor are limits on tribal authority necessary to protect non-Indian landowners. That could be done by conferring rights on the non-Indians. This leaves the only rationale to be one premised on racism, “the trust status itself being imposed based on the federally determined needs of the then-deemed ‘incompetent’ Indian allottees.” (P. 544.)
In Professor Shoemaker’s assessment, there must be a “gradual cascade of bottom-up transformative steps” to reset the system dynamics, including functional co-ownership schemes, active leasing rights, and liberalizing trust transfers, with “opportunities for meaningful grassroots experimentation and norm-setting around resource use and stewardship.” (Pp. 545; 492.) In other words, there must be sovereignty to sovereign nations over their lands.
Whether or not Indian land law is too embedded in the ground for any meaningful change, we would do well to study the subject, not simply to champion the cause of the Indian if we choose, but also to see what non-Indian land law could be without the foundational limits that protect autonomy and ownership.
Gregory M. Stein, Reverse Exactions
, 26 Wm. & Mary Bill Rts. J.
(forthcoming 2017), available at SSRN
Some exactions are just bad. By this, I mean that they fail to mitigate the harms they were created to internalize. This struck me recently while I was researching privately owned public open spaces (POPOS), which are often exacted in exchange for a density bonus. Through my research, I determined that POPOS often fail to achieve the goals of good public space, in part because they are often exclusionary. I found myself wondering whether the citizens who were stuck with new dense buildings that block light and air, and who received only a poorly functioning POPOS in exchange, had any legal recourse.
My question, in effect, was whether a neighbor could bring an exactions claim in reverse. I was pleasantly surprised to find that Professor Gregory M. Stein had interrogated this very question in his recent article Reverse Exactions.
Our existing exactions jurisprudence focuses on exactions that are excessive (or, too strong), and thus deprive the project applicant of his or her property rights under the Fifth Amendment. In this creative piece, Professor Stein tackles the opposite situation, wherein a development project is approved subject to exacted concessions, but those exactions are too weak to sufficiently mitigate or internalize the harms associated with the development.
Thus, the project’s negative externalities are inflicted on its neighbors, and those neighbors must bear the costs of the harm. In this case, Stein argues, neighbors should have a right to bring what he calls a “reverse exactions claim.” This claim would enable these third-party community members to challenge the government’s imposition of certain conditions as insufficient, arguing that their property rights have been taken as a result.
Stein begins his article by setting up and critiquing our current exactions jurisprudence. He restates the “essential nexus” and “rough proportionality” tests that the Court has laid out in Nollan and Dolan, but criticizes the application of these tests. According to Stein, the Court has treated governments that exact conditions as entrepreneurs, instead of as representatives or arbitrators.
Specifically, he takes issue with the Koontz Court’s portrayal of governments negotiating exactions as bad actors. The problem, he suggests, is that governments are not always, or even typically, opportunistically looking to enrich their own communities at the expense of the property owner who is seeking discretionary permits. Rather, governments are more often “functioning as mediators and referees.” (P. 19.) Indeed, Stein points out, exactions jurisprudence seems to be unconcerned with the fact that developers often have an incentive to maximize their profits at the expense of their neighbors. Exactions cases are also unique in that they fail to afford the same level of deference to governments that they generally receive in other types of land use decisions.
The problem with current doctrine, posits Stein, is that it leads to governments consenting to development with few or weak conditions that fail to actually mitigate the harms caused by the project. Those governments do this because they are fearful that they will be sued and lose if they propose exactions that are found to be too strong.
Currently, there is no direct way to challenge these overly weak exactions. This leads to an imbalance that favors developers and harms neighbors (and, more broadly, governments). This is where Stein’s proposal comes into play.
While he first suggests that the Court could revisit the Nollan/Dolan/Koontz line of cases to address the imbalance, he admits that this is unlikely. Thus, he proposes that instead, courts recognize a reverse exactions claim.
He defines this proposed claim as one that “neighbors can bring against government officials … [by] argu[ing] that government officials have imposed conditions on an applicant’s development that insufficiently internalize the externalities that the applicant’s project would impose on those neighbors.” (P. 22.) Thus, the neighbors would have a remedy for an “under-exaction,” defined to exist when neighbors are forced to bear those added costs, and thus their property rights are unconstitutionally impaired.
This, it seems, might be the most difficult part of a reverse exactions claim; because it is a type of takings claim, the neighbors must show that they have property rights that are being harmed by the project and its insufficient exactions. For example, Stein suggests that the asserted state interests in Nollan, including protecting the public’s beach views and preventing congestion, might not qualify as neighbors’ protected property rights. Thus, in a hypothetical reverse-Nollan case, while the neighbors might be able to make out a due process claim, they might not be able to raise a reverse exactions claim.
In contrast, Stein imagines a reverse-Dolan situation, wherein the city might allow the Dolans to expand and pave their parking lot while attaching limited exactions that fail to mitigate the increased stormwater runoff that would likely result from the project. In the event that this new impermeable surface directs stormwater onto neighbors’ lots, Stein argues, the neighbors could assert that the city made them give up an easement (allowing the Dolans to flood their land) without compensation. This would constitute the impairment of a property right, and thus the basis of a reverse exactions claim.
Therefore, in order to assert a successful reverse exactions claim—assuming the neighbor can show the taking of a property interest—he or she would first argue (pursuant to Nollan) that the proposed exaction fails to substantially advance the goal of mitigating a certain harm that the project would either create or make worse—here, the stormwater runoff. Second, the neighbor would argue that the condition lacks rough proportionality under Dolan because it fails to go far enough.
If the court finds that such reciprocal rights exist in a project’s neighbors, and finds that the government has imposed too weak an exaction, Stein suggests a scheme for paying just compensation to the neighbors.
Unlike direct exactions compensation claims, which are paid for by taxpayers, “[a]ny compensation that the government is required to pay to the prevailing neighbors [under a reverse exactions claim] would be charged back to the applicant that benefited unfairly from an exaction that did not adequately offset the negative effect of its project.” (P. 22.) Stein would leave the specific procedures for administering reverse exactions claims to be sorted out by courts and state legislatures.
Through this article, Professor Stein joins the ranks of other creative scholars such as Professors Chris Serkin and Tim Mulvaney, who have suggested that we should not always be so defensive when it comes to takings law, and might instead find ways to use it to reach more progressive ends. Stein does that here; the goal of a reverse exactions claim is that the “fear of litigation from neighbors and not just from applicants may lead to more equitable exactions.” (P. 51.)
Transferable development rights (TDRs) are a land-use planning tool that enables regulators to restrict the development of one parcel of property more densely than would otherwise be permitted by applicable land use regulations, while also giving the owners of the restricted property the right to “sell” their property’s development potential to owners of less-restricted land. Ever since the Supreme Court decided Penn Central Transportation v. New York City, a number of legal issues about TDRs have remained unanswered.
In his recent engaging essay, Penn Central Take Two, Christopher Serkin tackles the most important of these issues: Whether TDRs are themselves protected by the Fifth Amendment’s Takings Clause.
To contextualize the question, a word about Penn Central and its aftermath is in order. The facts of the original litigation are well known. In Penn Central, which Professor Serkin correctly characterizes as the “most important regulatory takings case of all time,” the Supreme Court rejected a takings challenge to a historical preservation regulation that prevented the construction of a massive high-rise structure above New York’s Grand Central Station. One of the reasons why the Court held that the “landmarking” of Grand Central did not effect a taking was that, at that time, New York City gave the terminal’s owner (Penn Central Transportation Company) TDRs enabling them to transfer at least some of the landmarked parcel’s development potential to adjacent lots.
To simplify a long story about the later developments, in 2006, the current owners of Grand Central Station—Midtown TDR Ventures (“Midtown”)—purchased the terminal in large part to acquire the TDRs granted at the time of landmarking. Midtown thereafter entered into negotiations to sell the TDRs to an adjacent landowner for $475 million, to enable the construction of one of the tallest buildings in New York City. (As a rule, TDRs are particularly valuable in NYC because they permit the construction of extra stories on buildings.) But, before the sale was finalized, the city rezoned the property to permit the construction of the skyscraper without the TDRs.
Midtown then filed a lawsuit asserting, among other things, that the rezoning of the “receiving” parcel was tantamount to a taking of Midtown’s TDRs. For a variety of reasons, the case settled before any court had the opportunity to opine on the issue.
As Serkin convincingly argues, the question posed in the litigation is a critical one, and its import extends beyond land use policy. As Serkin points out, if TDRs are protected by the Takings Clause, then other regulatory entitlements with “property-like” characteristics, such as emission allowances in cap and trade regimes, tradable fishing quotas, and taxi medallions, presumably are as well.
If the Takings Clause locks these regulatory promises into place, then there is a serious risk of regulatory entrenchment—with potentially negative consequences for both regulators and the regulated. On the other hand, if the government’s pre-commitments are too easily modified or even abandoned, then the value of devices like TDRs and emissions allowances is dramatically undermined for both regulators and property owners.
Serkin’s solution to these difficulties is to permit the government to make binding promises to entitlement holders, provided that these commitments are transparent and impermanent. This is probably the right answer as a matter of regulatory policy, and is in fact analogous to the “amortization” of nonconforming uses in zoning law, which is constitutionally permitted in most (but not all) states.
Serkin’s regulatory proposal, however, leaves many of the constitutional questions raised in the recent TDR litigation unanswered: To begin, are TDRs property at all? TDRs do have property-like characteristics (e.g., they are subject to market transfer). Serkin assumes, citing Charles A. Reich, that certain kinds of regulatory entitlements are property, but the concept of regulatory property remains contested and its contours remain amorphous at best.
Second, if TDRs are subject to takings protection, what is the “denominator” against which the impact of the devaluing regulation is to be measured? Serkin suggests that the “denominator” in the Midtown litigation ought perhaps to be the Grand Central parcel as a whole, but Midtown argued, à la Horne v. USDA, that the regulation devaluing their TDRs was a total taking of the amount of their loss. This is, as Serkin argues, somewhat circular since the government’s regulatory actions are a significant determinant of the value of TDRs, but there is a certain logic to Midtown’s argument since TDRs are intangible financial “property” if they are property at all.
And, finally, if TDRs serve the purpose of mitigating takings risks—as opposed to, as Chief Justice Rehnquist and Justice Scalia both argued, compensating owners whose property had been taken—then should regulatory actions devaluing them trigger a reassessment of whether the original regulation, sans TDRs, would have been a taking?
These questions—each of which has far-reaching implications—persist, and will undoubtedly return in subsequent litigation.