Property rites

Posted: Aug 09, 2001 12:00 AM

WITH police on hand to try to maintain order, the Loudoun County (Virginia) board of supervisors recently imposed severe restrictions on the building of homes, despite angry protesters. The board's plan allows only one house to be built for every 10 acres in some places and for every 20 or 50 acres in other places.

Opponents of these restrictions accused the supervisors of violating their property rights. One of their signs read: "Thou shalt not steal."

Property rights are one of the most misunderstood things in law and one of the most disregarded things in politics. The vast amount of land that the Loudoun County supervisors are micro-managing does not belong to them or to Loudoun County. It belongs to its respective individual owners.

According to the Constitution of the United States, the government cannot take private property without compensation. However, judges have been letting governments get away with doing just that for about half a century now. So long as the title to the property remains in the hands of its owners, the courts let local, state and federal governments do pretty much what they please, even if that destroys much of the value of the property.

From an economic point of view, there is no real difference between confiscating half of someone's property and reducing its value by half. When county officials drastically restrict the uses to which land can be put, that land becomes less valuable on the market. A farmer cannot sell his land to someone who wants to build an apartment complex if the county regulations make it illegal to build an apartment complex.

When the use of land is restricted to ways that only the wealthy can afford, that eliminates a major part of the demand for that land -- and a major part of its value. Land use laws are just one way that governments can confiscate much of the value of private property without having to compensate the owner. Where there are stringent rent control laws, as in New York City, the cost of the services that a landlord is required to provide can exceed the rents he is allowed to collect, so that an apartment building can end up with a zero value -- or even a negative value.

That is why thousands of buildings in New York have been simply abandoned by their owners and ended up boarded up. The entire value of the building has been destroyed by government, without compensation.

One of the reasons property rights do not get all the protection that the Constitution prescribes is that they are seen as special benefits to the affluent, which must give way to the general welfare. The old leftist phrase "property rights versus human rights" summarizes this mindset.

This ignores the value of property rights to the society as a whole, including people who own no property. Most Americans do not own agricultural land, but they get an abundance of food at affordable prices because farmers own both land and its produce as their private property, and therefore have incentives to produce far more efficiently than in countries where the land is owned by the government. The Soviet Union was a classic example of the latter, with hungry people despite an abundance of fertile land, inefficiently used under government control.

Loudoun County illustrates another danger in political confiscation of private property. It is precisely the wealthy and the affluent who gain by restricting other people's property rights. Although the average rich person -- by definition -- has more money than other people, the non-rich often have far more wealth in the aggregate, simply because they are more numerous.

In a free market with undiluted property rights, the non-rich would out-bid the rich for much land and use that land in ways that suit the circumstances of ordinary people. For example, grand estates would be broken up into smaller plots for more modest homes or used for building apartment complexes. That is what the affluent and the wealthy strive to prevent by government-imposed restrictions on land use. Such restrictions also increase the value of the existing estates of the rich.

California pioneered in such restrictions, years ago, which is why California real estate prices and apartment rents are out of sight. But Loudoun County is one of many other places that are now catching up, using the same legalistic techniques and the same political rhetoric about the environment, preventing "sprawl," and other pieties that beguile the gullible.