The Tyrant Next Door

“I’m all for capitalism, but not in my neighborhood!”

This has become the unspoken creed of many a do gooder. While most Americans support the free market at the state and national level, they don’t seem to be quite so keen on it at the local level.

In many suburban areas, deed restrictions have become a way of life. We want our neighborhoods to look nice and we want our neighbors to maintain their property about as well as we maintain our own. A couple of years ago I received a nice little letter explaining that if I left my empty trash can in the front yard again that I would receive a $75 fine. After the trash truck came by my visiting mother-in-law had placed it on the side of the house where I can’t see it when I pull my car into the garage. Oddly enough while I received a scolding for my trashcan, no rules exist to stop the new neighbor across the street from cutting down four 50-year old live oak trees.

Neighborhood enforcement boards have earned a bad reputation in recent years by letting a select few go on power trips. A man in my neighborhood was cited for parking a boat on the street for a mere 4 hours between midnight and 4 a.m. en route to a fishing tournament. You have to wonder what kind of psycho is goose-stepping around the neighborhood at the wee hours of night looking for infractions. It is annoying, but we were all given the rules when we moved into the neighborhood. Nobody forced us to buy a house there.

In some old neighborhoods, there are no deed restrictions. In Houston, there is no zoning either. For decades, this wasn't an issue. The residents just went about their lives and the neighborhoods maintained their modest appearance. However, over the last decade interest in living in the center of the city has grown dramatically. Old and small houses are being replaced by townhomes packed onto the old lots. The Not-In-My-Back-Yard (NIMBY) crowd now wants the city to allow new deed restrictions to prevent other property owners in their neighborhoods from building townhomes. Some have been successful, so more are trying. They want to keep their neighborhoods the way they have always been. Well, at least since the last time a developer came in and tore up an old family farm to build the neighborhood, and the time before that when the farmer tore up unspoiled wilderness.

In Bellaire, a close in suburb of Houston, they have had restrictions to prevent townhomes on the books for years. The unforeseen consequence was that old homes were still torn down and monster homes took their place. You cannot afford to tear down a house to build another one unless you have a lot of money. If you have a lot of money, you probably are not going to build a small house. Of course, the NIMBY crew doesn’t like these either because the new homes tower above their small homes. In Austin, they have now made restrictions to prevent townhomes and “McMansions”, effectively preventing redevelopment in large swaths of the city.

This means that there are fewer areas for redevelopment. This drives up the prices of available land and prevents those with modest means from moving into the city. This also gives a bigger incentive for developers to seek easier targets, like poor areas with little neighborhood organization. This has consequences as well. Low-income neighborhoods often have unbelievably cheap rents in old buildings that cannot be replicated by new construction.

What is the answer? More regulation and government programs of course. All across the U.S. government organizations are building or subsidizing “affordable housing”. In San Francisco, every new home is required to give money towards affordable housing, increasing the cost per home between $22K and $44K according to a recent article from reason.com. San Francisco is already one of the most expensive places to live in America and now they have added even more costs on top of that. However, another sticky problem arises when deciding where to build the affordable housing. The NIMBY crowd gets fired up again using our courts to make sure it’s not in their back yard.

Yet another consequence from preventing denser development is “Urban Sprawl”. Ironically, the same anti-development people are against urban sprawl. The opponents of urban sprawl believe that having cities more spread out leads to more pollution and loss of open space. What’s their answer to urban sprawl? That’s right. More regulation and government programs. Cities like Portland, Oregon have instituted growth boundaries around their cities, outside of which development is very restricted. These boundaries force density and limit the supply of land for development.

Economics 101, when you limit supply, what happens to price? It goes up. Is it any wonder why a house in Houston, which has no zoning and little land use regulation, costing $200K goes for $850K in San Francisco, which has stringent development restrictions? Not all forms of restrictions are bad, but the untended consequences of excessive regulation have driven the price of homes in some cities beyond what the average person can afford.

The fundamental problem is that we cannot regulate our way to paradise. Every regulation is going to have an unforeseen side effect, prompting the “need” for more regulation. Everyone has different preferences for how they would like to live and what they want their city to be like. When property rights are taken away our cities become dominated by those who yell the loudest or have the most money. Even though I may look like a curmudgeon from time to time, I feel safe in erring on the side of property rights.