An Evil Eye and an Unequal Hand: The Lurking Threat to Liberty in Land-Use Regulation
(For the use of the membership only; copyright © 2013 by Tom Charles Huston, all rights reserved, reprinted by permission)
by TOM HUSTON
As a young lawyer, my first encounter with the Byzantine system of governmental land-use regulation resulted from the desire of a client to expand its manufacturing plant. The plant was located in an aging and ultimately derelict industrial area on the near east side of Indianapolis and the contemplated expansion consisted of a prefabricated steel structure. With the order placed and the deposit made, someone at the company thought to check a site plan to confirm that the new structure would comply with applicable zoning regulations. Much to the dismay of management, the new structure could be wedged onto the available site only by encroaching on an established side yard. This encroachment was less than two feet, but it was clear that the structure could not be built as planned without a variance from the side-yard requirements of the industrial zoning ordinance.
I appeared before the Board of Zoning Appeals confident that our variance request, de minimus as it was, would be granted with little fuss. What I had not anticipated was a godly remonstrator. Not far from my client’s plant were a Catholic church and school. The parish priest was not pleased with his neighbor for reasons never clear to me and sought a continuance of the hearing so that he would have time to gather witness testimony to support his contention that the proposed expansion of the plant would risk poisoning his students and should be denied on public-safety grounds.
Normally, I would not have been troubled by a continuance. In this instance, however, the continued hearing date would fall later than the last day on which the client could cancel his pre-fab order and recover his deposit. Prudence argued against gambling that, ultimately, the board would conclude that a two-foot encroachment into an industrial side yard was not likely to poison youngsters in their classrooms a block away. The order was canceled, the variance request withdrawn, and my career as a zoning lawyer ended. I was not temperamentally suited to arguing with priests that my clients ought to have the right to poison their parishioners.
Although I could avoid direct confrontation with the arbitrariness of governmental land-use regulation by restricting my law practice, I could not avoid it as a principle in Brenwick Development, a residential land-development company. Over the course of 37 years, Brenwick developed thousands of home sites in the Indianapolis market. We never had a land-use regulatory hearing, whether for rezoning or primary-plat approval, at which remonstrators failed to appear. It invariably required more time and effort to get a new project approved than it did to build it, and the costs of obtaining governmental approvals were heavy — attorneys’ fees, engineering fees, consultant fees, transportation surveys and drainage studies add up to big money. These costs, of course, were not absorbed by the developer. They were rolled into the cost of the lots available for purchase by home builders, thus contributing to the escalation of home prices.
A final experience has influenced my thinking on land-use regulation. For a quarter of a century, I was general counsel for Indiana Landmarks. I am a true believer in historic preservation, and I have fought many battles with marauders who have tried to pillage the historic-built environment. The most loathsome of the bulldozer crowd are units of government, particularly transportation authorities. I concede to governments none of the discretion over use of property that I embrace as a right of owners of private property. Governments have a fiduciary obligation to the citizenry to be respectful of our heritage and our environment. The distribution of taxpayer dollars for the purpose of wreaking havoc on the historic-built environment is a public bane to which more conservatives should be alert. A leading cause of the loss of historic sites and structures in our communities is the flow of federal dollars, not just to governments but to private persons favored with “grants” from Uncle Sam. My best days were those on which I could make life miserable for urban developers nursing on the federal teat.
There is irony in the fact that Justice George Sutherland, who wrote the opinion of the Supreme Court of the United States affirming the constitutionality of zoning, is widely regarded by libertarians as an exceptionally articulate and principled advocate of a liberty interest rooted in natural right. Much to their dismay, in his opinion for the court in Village of Euclid v. Amber Realty,1 Justice Sutherland affirmed zoning regulation as a reasonable exercise of the police power by local jurisdictions and consistent with the common law principle of sic utere tuo ut alienum non laedas (translated by Hadley Arkes as roughly “use your own for the sake of causing no injury to others”).2 Over the intervening years, the Supreme Court has never questioned Sutherland’s rationale, and the cases it has decided have largely involved the arbitrary application of land-use regulation and the extent of constitutional limitations on the exercise of the right of eminent domain.
No conservative (I don’t purport to speak for libertarians) believes that there is any such thing as an absolute right of an owner to use his property for any use he may desire. The common law of nuisance imposed restrictions on the use of realty, and the pre-New Deal Supreme Court, in the era of Lochner, Adkins and Schechter, shared the view of Mr. Justice Field, dissenting in Munn v. Illinois, that property rights are subject to such restrictions as are reasonably required to protect “the peace, good order, morals, and health of the community.”3
As a matter of constitutional law, the right of state and municipal governments to establish zoning regimes and regulate the development and use of land is settled, but simply because it is constitutional, it does not follow that the exercise of a right is wise public policy. A recent example of not exercising a right to the full extent of its scope as defined by the Supreme Court is the decision of several states to restrict the authority of municipalities to exercise the power of eminent domain for the purpose of urban “revitalization,” notwithstanding that the Supreme Court in Kelo v. City of New London 4 held that the “public use” restriction of the Fifth Amendment (as applied to the states through the Fourteenth Amendment) does not preclude the taking of property for the benefit of private parties.
Conservatives should keep in mind that land-use regulation is hugely popular among middle-class voters. Every homeowner has visions of a scrap yard on the vacant lot across the street in the absence of rigorously enforced zoning ordinances. Although I can cite no scholarly authority, I suspect that participation in land-use regulatory hearings engages more citizens in the actual functioning of government than any civic activity other than voting.
As a political matter, I am generally disinclined to pick a fight with my neighbors that I can’t win because nine people in robes are lined up against me. Accordingly, my concerns have been peripheral to the theoretical arguments against a zoning regime. Houston may prove that urban sprawl can succeed as well without zoning as with it, but I don’t live in Houston. My concerns are mundane and relate to how to tame the monster, not kill him.
These concerns are rooted in four questions:
1. Can land-use regulation be reconciled with a healthy respect for the liberty interest of the individual?
2. How do we mitigate the arbitrariness of land-use regulation?
3. How do we shape land-use regulation to accommodate market changes and preferences?
4. To what extent are there market-based alternatives to governmental land-use regulation?
Property and the Liberty Interest
John Locke and the early moderns held that ownership of property is a natural right. Thomas Jefferson’s omission of the word property in his identification of “unalienable rights” implied no downgrading of this fundamental right. According to republican theory, the word liberty incorporated the right to property. As Sylvia Frey points out, “Arguing from the Lockean premise that the right of property derives from each person’s right to life, Americans of the Revolutionary generation proclaimed property the necessary foundation of happiness, without which no individual could enjoy independence or free will, the most essential component of liberty. State constitutions written during the Revolutionary period invariably link the three words, liberty, property and happiness, as though each implied the other.”5
The delinking of “property” from “liberty” commenced at Gettysburg. Liberty, as understood by those in rebellion, included a right of property in human chattels. Determined to expunge the repugnant idea, Lincoln junked “liberty” in favor of “a new birth of freedom.” In Lincoln’s formulation, “freedom” is not a synonym for “liberty.” It is a reformulation of the classical understanding of the nature, source and scope of the rights of man. Lincoln, without exactly saying so, downgraded the centrality of property ownership as a right derived from the nature of man.6
While the pre-New Deal Supreme Court has been accused by progressives of having put the rights of property and the freedom to contract above “human” rights, the truth (as Hadley Arkes well demonstrates7) is that the core issue in every case was the effect of regulation — whether of the use of property, the terms of employment or the engagement in trade — on individuals. This is obvious (to select but one notable example) in the case of Roscoe Filburn, who was deemed a criminal as a consequence of making home use of wheat grown on his farm.8
The contemporary problem is that courts and legislatures divorce the regulation of property from the consequences of that regulation on the pursuit of happiness by those affected. This is fundamentally a legislative and not a judicial problem. It is legislative majorities rather than judges who pose the greatest threat to the liberty interest of individuals in the exercise of rights of property. As my White House colleague Lyn Nofziger used to say (after Daniel Webster), “No man’s life or property is safe when the legislature is in session.”
Clearly Arbitrary and often Capricious
The authority and requirements for local planning and zoning are codified in Article 36, Chapter 7 of the Indiana Code. Representative of the rigor and precision of legislative thinking that drives land-use regulation is this statement of purpose set forth at IC 36-7-4-201:
b) The purpose of this chapter is to encourage units to improve the health, safety, convenience and welfare of their citizens and to plan for the future development of their communities to the end: 1) that highway systems be carefully planned; 2) that new communities grow only with adequate public way, utility, health, educational and recreational facilities; 3) that the needs of agriculture, forestry, industry and business be recognized in future growth; 4) that residential areas provide healthful surroundings for family life; and 5) that the growth of the community is commensurate with and promotive of the efficient and economical use of public funds.
The sort of mischief inspired by this broad-brush approach to the regulation of property is obvious when, for example, you begin to contemplate the full range of opinion as to what constitutes “healthful surroundings for family life.” Not a slaughter house, I gather, but what about a corner pub?
The legislature requires that plan commissions adopt a comprehensive plan “for the promotion of public health, safety, morals, convenience, order, or the general welfare and for the sake of efficiency and economy in the process of development.”9 All governmental units are expected to take the approved comprehensive plan into account in making decisions affecting development. In a growing community a statutorily compliant comprehensive plan is about as helpful as a Soviet five-year plan.
Although the legislature has provided local communities with a full box of tools to regulate the use of property, the principal ones are a zoning ordinance, a subdivision control ordinance and a sign ordinance. Zoning ordinances not only establish permitted uses within designated areas but also establish development standards that must be adhered to (such as the side yard requirement that derailed my career as a zoning lawyer). The subdivision control ordinance specifies with excruciating detail the requirements for the design, platting and development of real estate. Signs ordinances are generally straightforward and differ materially in the stringency of their requirements from one community to the next. The draftsman of a typical sign ordinance, however, is a recovering aesthete who in grad school was exposed to a photograph of a 19th-century Indiana commercial streetscape.
Aware that the one-size-fits-all character of these ordinances may result in individual hardship, the legislature has authorized boards of zoning appeals to grant variances from ordinance requirements. The burden of justifying any such variance is on the petitioner, and it is a heavy one.
The rigidity of these ordinances as applied to residential development results in cookie-cutter subdivisions that continue to be modeled on design guidelines developed by the Federal Housing Administration shortly after World War II. There is virtually no discretion for the developer except to the extent it can convince a board of zoning appeal to grant variances. Brenwick found it necessary in connection with development of a neo-traditional, mixed-use community to obtain more than a thousand variances from street-design requirements in order to calm traffic, favor pedestrians, and accommodate vistas in the design of the community.
Justice Sutherland in his decision in Village of Euclid embraced the notion that geographical separation of uses and lot and building-development standards are a legitimate exercise of the police power in that they have among their objects “the promotion of the health and security from injury of children and others by separating dwelling houses from territory devoted to trade and industry” and “aiding the health and safety of the community by excluding from residential areas the confusion and danger of fire, contagion and disorder, which in greater or less degree attach to the location of stores, shops and factories.”10 Advances in building design and materials together with changes in transportation and fire safety make these objects seem less compelling as reasons to implement a regime of strict land-use regulation. While the fallback justification is always “the public health, safety and welfare,” the political reality is that zoning is largely a scheme by which prevailing interests determine winners and losers, exclude the undesirable and drive up prices by restricting supply. The voices never heard at a zoning hearing are those of the prospective residents who will be excluded from the community if current residents have their say. Closing the door behind you is a common gesture in middle-class suburban communities.
The means to the ends sought by the planners and their beneficiaries is not so much the designation of uses as it is the determination of density. Low density increases housing costs, consumes more land and privileges the comfortably off over the economically aspiring. The Obama administration is on to this racket and intends to exploit the class bias implicit in it by nationalizing land-use decisions. By applying fair-housing rules and conditioning government grants in such a way as to force increased density in single- and multi-family residential developments, the administration hopes to remedy the discriminatory impact on economic and racial minorities it believes is inherent in land-use regulations that require low-density development.
While the coming assault by the Obama administration on local planning and zoning ought to scare the pants off of anyone who believes in property rights and local governance, the likelihood is that it will meet less resistance than reason would anticipate. Alleging racism and offering “free” federal dollars to mitigate that racism is a combination that Democrats welcome and Republicans are too gutless to resist. Application of disparate impact analysis to the results of local residential zoning in most suburban communities will result in a “proven” case of racial and economic discrimination. Local communities are going to be hard pressed to justify existing residential patterns (which demonstrably are affected by zoning decisions) if the test is disparate impact. Any chance of defending against the blows that are about to be struck depends on judicial rejection of disparate-impact analysis and less enthusiasm by local governments for federal grants-in-aid.
Discretion and the potential for abuse arising from it are inherent in the regulatory process. This gives rise to the dilemma that to the extent you build more flexibility into the regulatory system, the broader the range of discretion becomes and the greater are the opportunities for abuse. Notwithstanding the risk, the need for flexibility to accommodate the rapid social and economic changes in our society is demonstrable. The rigid, detailed, categorical system now in place needs to be jettisoned and replaced by a simpler, more schematic and flexible system.
It is not unusual for development of a comprehensive plan to take 12 to 18 months. During this process, which includes input from community activists and special-interest pleaders, the planners seek to predict how their little part of the world may or should look 10 years down the road.
Most businesses have strategic plans, and there is no reason why governmental units shouldn’t have them as well. Most businessmen, however, update their plans annually in light of changed circumstances. Municipalities normally update their comprehensive plans every 10 years.
Many of the most dramatic changes over the past 30 years affecting housing were changes that few saw coming: the decline of the traditional (e.g., two parents and two children) family from 80 percent of the new housing market to 25 percent; the increase in demand resulting from divorce with, for example, mom and dad each buying a house in close proximity so that the children can stay in the same school; housing formation generated by social acceptance of same-sex relationships; the accelerated downsizing by Baby Boomers not as a consequence of children leaving the nest but as a result of ownership of a second home in Florida or Arizona; the increase in gasoline prices to $4 a gallon; and, most significantly, the Great Recession during which, for example, housing starts in the Indianapolis market collapsed from more than 16,000 a year to less than 3,000.
The livelihood of real-estate developers, home builders, investors and mortgage lenders depends on reading the market and responding quickly to changes in it. The tenure of politicians and bureaucrats is rarely affected by the inability of a community to respond promptly to market changes. If buyers want smaller houses on smaller lots, a community whose zoning laws permit only large houses on large lots is going to quit growing whether that is part of its plan or not. Municipalities hostile to retail and office development will encounter budget deficits as a consequence of unanticipated constitutional caps on the taxation of residential real estate. Jurisdictions that effectively exclude the construction of apartments will unintentionally force their young adults, who in times like these cannot afford to buy a house, to live with mom and dad or move to an apartment with friends in another community.
Anyone familiar with the writings of F. A. Hayek on the inability of planners to access and distill the vast knowledge required to establish and to maintain markets, or with Jane Jacob’s insight into the utility of locality knowledge available only to neighborhood residents, understands why government planning ultimately fails — no combination of planners commands the full range of information necessary to anticipate human action.11
Virtually all commercial and residential projects of any size or sophistication developed in the United States over the past 20 years are subject to a private scheme of regulation established by contract through the placement of record of covenants and restrictions (C&Rs) that run with the land, and to which every purchaser of a lot, parcel or structure in the development takes title. The degree of this regulation varies greatly among projects, but all restrict uses and impose standards and most create an association of owners to enforce the restrictions and administer any commonly owned property.
Today there are 323,600 owners associations, including condominium associations, that according to data published by the Community Associations Institute involve 63.4 million Americans.12 The scope of power exercised by these associations is extraordinary. As Russ Guberman explained,
Although structured as nonprofit corporations, home owners associations (HOAs )operate as private governments. An HOA can impose fines on those who flout its quality-of-life policies, just as a municipality can penalize those who violate its zoning, anti-smoking, or noise-control laws. An HOA also levies dues and assessments that are as obligatory as taxes and sometimes less predictable. In exerting these quasi-political powers, HOAs represent one of the most significant privatizations of local government functions in history. 13
Membership in an owners association is not voluntary. Every purchaser of a home, lot or parcel in a community subject to C&Rs is automatically a member. An owner’s use of his property is subject to the provisions of the applicable C&R whether she likes it or not. Many owners do not and, as a consequence, state legislatures have increasingly seen fit to intervene by limiting or conditioning the powers of HOAs. Since the powers are created by contract, each purchaser having voluntarily assumed the obligations imposed by an instrument of record conditioning title, such legislative intervention raises the question of abridgment of vested contract rights first addressed in the Dartmouth College case famously argued before the Supreme Court by Daniel Webster.14
The private scheme of regulation established by C&Rs is always subject to modification or termination upon such terms as may be stated in the governing documents. The vigor of administration is determined largely by the board of the owners association, which is elected and responsible to the owners in their collective capacity as members. It is a democratic process, but it is just as subject to abuse as the official governmental system of regulation. Reports of unreasonable and vindictive administration of OAs are frequent (the most popular among editors being enforcement of restrictions on flying flags).
Private contractual regulation is a subject that deserves more notice than I can give it here, but the point is that once you embark upon a scheme of land-use regulation, whether public by legislation or private by contract, you encounter similar problems based on the frailty of the human condition. The alternative is a world without regulation, which is unthinkable in our time and, except in the imagination of social-contract theorists, likely never existed.
If, then, land-use regulation is simply one of the costs we pay for life in a complex system of benefits and obligations often distributed disproportionately whether measured by an economic or moral standard, then the questions are how do we identify, measure and limit abuse of the process?
I have suggested some ways to do so, but I conclude with this thought: We have long known that laws fair on their face may, as Justice Matthews wrote in his opinion in Yick Wo v. Hopkins, be “applied and administered by public authority with an evil eye and an unequal hand.”15
Citizens must be alert to the administration of regulations every day, and from day to day and object through all available channels when the evil eye and the unequal hand are applied to advantage some at the expense of others.
In old age I have little faith in legislatures and hardly more in courts, but I still think elections matter.
1. 272 U.S. 365 (1927).
2. Hadley Arkes. The Return of George Sutherland: Restoring a Jurisprudence of Natural Rights. Princeton University Press, 1994, p. 70.
3. 94 U. S. 113, at 146 (1877).
4. 545 U.S. 469 (2005).
5. Sylvia R. Frey, “Liberty, Equality and Slavery. The Paradox of the American Revolution,” in Jack P. Greene (ed.) The American Revolution: Its Character and Limits. New York University Press, 1987, pp. 242-243.
6. “The world has never had a good definition of the word liberty, and the American people, just now, are much in want of one,” Lincoln declared four months after his Gettysburg Address.” Actually, the problem was not, as Lincoln acknowledged, the absence of a definition, but the existence of two incompatible definitions rooted in disagreement over the nature of property. See, Abraham Lincoln, “Address at Sanitary Fair, Baltimore, Maryland,” April 18, 1864. Roy P. Basler (ed.), The Collected Works of Abraham Lincoln (New Brunswick, NJ: Rutgers University Press, 1953), 301-302.
7. Arkes, op. cit.
8. Wickard v. Filburn, 317 U.S. 111 (1942).
9. IC 36-7-4-501.
10. 272 U.S. 365, at 391.
11. Emily Washington. “The Use of Knowledge in Urban Development,” Market Urbanism at http://marketuranism.com/2012/11/15/the -use-of-knowledge-in-urban-development/ (accessed on Nov. 19, 2013).
12. Kaid Benfield. “The Tyranny of Homeowners Associations.”The Atlantic Cities, Feb. 19, 2013 at http://www.theatlanticcities.com/neighborhoods/2013/02/tyranny-homeowners-associations/4731/ (accessed Nov. 25, 2013).
13. “Home Is Where the Heart Is,” Legal Affairs, November/December 2004 at http://www.legalaffairs.org/issues/November-December-2004/feature_guberman_novdec04.msp (accessed November 25, 2013).
14. Trustees of Dartmouth College v. Woodward, 17 U. S. 518 (1819)
15. 118 U. S. 356 (1886), at 374