Saturday, April 26, 2008

Jarvis DeBerry: Cato Fellow?

Epstein's theory of "regulatory takings" galvanized the movement fifteen years ago when his book Takings: Private Property and the Power of Eminent Domain first appeared, describing an ingenious new constitutional interpretation designed to rein in modern government. Regulations, he argued, should be properly understood as "takings" under the Fifth Amendment ("...nor shall private property be taken for public purpose without just compensation"), so government must pay those businesses or individuals whose property value is in some way diminished by public actions.

"It will be said that my position invalidates much of the 20th century legislation, and so it does," Epstein wrote in Takings. "But does that make the position wrong in principle?... The New Deal is inconsistent with the principles of limited government and with the constitutional provisions designed to secure that end." In telephone conversation, I asked the professor for examples and he obliged with gusto.

"Most of economic regulation is stupid.... What possible reason is there for regulating wages and hours?" Epstein said. "If my takings doctrine prevails, you have no minimum-wage laws. That's fine. You'd have an OSHA a tenth of the size. That's fine too. You'd have no antidiscrimination laws for privileged employees, which would be a godsend." Does Professor Epstein wish to restore the Lochner era of 1905? "Well, God bless, of course," he said. "But why do you think that's socially irresponsible?" In fact, he portrays his approach as moderate compromise because, unlike the Lochner doctrine, it would not invalidate the regulatory laws that legislatures enact. He would merely make the public pay for them. "We will allow the majority to have its way so long as it's willing to buy off its dissenters at a fair valuation," Epstein told the libertarian magazine Reason.
William Greider

The Parish Council, by its own authority, decided that it could void the property rights of everybody within its jurisdiction. A lawsuit contends that the ordinance violates the Fifth Amendment to the U.S. Constitution, which says that Americans can't be "deprived of life, liberty or property without due process of law" and says "nor shall private property be taken for public use without just compensation." On April 3 a federal judge issued a temporary restraining order prohibiting the parish from enforcing the ordinance.

The plaintiffs' argument is beautifully simple: By not allowing them to rent their property as they see fit, the parish is effectively taking their right to use and enjoy their property. They note, "All plaintiffs have obtained mortgages to redevelop their properties with a pledge of rentals as part of the security given."

The consequences of St. Bernard's "taking," could be the plaintiffs' inability to pay their mortgages.
Jarvis DeBerry

I can't believe that I'm criticizing Jarvis DeBerry for not bringing race into a discussion, but some issues can't be discussed honestly without mentioning race. As this City Business article makes clear, the St. Bernard rental ordinance is almost certainly about race:
“Really and truly I don’t feel comfortable there, but I need somewhere to live,” said Alveris, who has been living with his mother in her Harvey home since being evicted. Blacks such as Alveris make up 70 percent of the 54 Your Home Solution Louisiana renters, said Brenneman.

The YHS plan was to renovate the properties and “quickly sell” them for between $135,000 and $165,000, said Brenneman, an investor and an employee of the parent company, Your Home Solution Management, which manages investor-owned properties in Central Florida and the New Orleans region.

Of course, it also seems that the plaintiffs are "flippers."

In fact, I'm really not interested in criticizing DeBerry, but I cringe whenever the concept of "property rights" is applied to investment property. I won't go into a long-winded discussion of property rights, but I will refer to this letter from a Bywater resident and this one from a Violet resident. The arguments of this Picayune editorial could only be used against one; DeBerry's could be used against either.

BTW, I am sympathetic to the home owner from Violet; a community should have some right to protect itself from absentee profiteers. Zoning regulations limiting the number of units on a rental property would be well within a community's rights, but that's not what St. Bernard Parish is proposing. I can't imagine that these that any investor group would want to hold on to single, or even double, unit investment properties indefinitely.

Bizarre. Epstein that is. Thanks for linking to an article I intend to print and read with great interest.

As a grad student, I had to struggle against the body of research in the development field lauding the benefits of private property solutions.

What all of those nutbags like Epstein fail to acknowledge is that no one acquires the right to private property without a body of law sanctioned by the community being respected.

Communities make the laws about what is private, what is public, and what falls somewhere in between.

Yes, people like to own their homes, and that tends to produce well-maintained properties, wealth creation, better community services, etc. -- but for reasons which aren't entirely explained by the fact of private property, and have a lot to do with opportunity, incomes, education, character, and yes, race.

Slums are filled with private owners who fail to take care of their properties, just as rivers are filled with pollution dumped into them by factories and farmers who choose not to *own* the problems they create.

When citizens have had enough of people not claiming *ownership* for the problems they create -- externalities -- they demand laws and institutions which regulate activity and *assign ownership*.

Takings is often just that -- assigning ownership for problems the community deems undesirable -- including, in the landmark South Carolina Lucas victory for the takings approach -- what the community deems undesirable development of public vistas and habitats which they want to remain in a natural state to the extent possible.

As for St. Bernard, I'm of the view that the blood relative ruling was racist, and that is a violation of the 14th Amendment and the Civil Rights Act.

Other than that, the community has every right to zone neighborhoods for rental or not. I wish the New Orleans City Council would do something along those lines so that people who actually want to own didn't have to come up against slumlord owners, flippers, and inheritance beneficiaries who just want to coast along on their investments collecting rent. I'd say, tax people out the yin yang for owning anything beyond a second house, or a second unit in an apartment complex, and loosen up the market a little bit.

Of course, the housing market has loosened now, but everyone's trying to hold on to the value of properties they knew (or should have known) were inflated, but hoped would hold their value. It wasn't a good bet, as it turns out. And that's too bad, but the regulatory environment which allowed flipping to occur, and bogus loans to be made, is a big part of the problem.

We should have had *more* regulation, not less.
At least people like Epstein are willing to argue against all government regulation. If I said that property you don't live in is just an investment and the government has as much right to regulate it as any other investment, Epstein would argue against all regulation. Of course, they always fall back on ahistoric arguments -- we never had a government-free economy. Anything that went wrong before the Progressive Era and the New Deal can be blamed on government interference, but the great expansion of the nineteenth century was due to the lack of government interference, or something like that.

Most other Cato types love to keep the discussion on "property rights," and try to make every regulation a matter of "property rights," because they know that people will will associate property with home. I suppose that people have emotional attachments to their second homes, but, beyond that, I don't see anything more sacred about real estate than stocks. The main difference is that my ability to make money in the stock market is limitted by federal regulations on corporate behavior, the ability to make money on real estate is limitted by state and local ordinances.

I certainly can't argue in favor of the laws that St. Bernard proposed, but I would defend the parish's right to stricter zoning ordinances if uniformly applied -- no matter what I thought the motivation was.

Anyway, as I've said before, there's a widespread myth that property rights are under assault. I'd argue that community rights have been under attack i n the quarter century since I was in college.
Community rights under assault -- I can already hear the talk show egos somehow trying to conflate community with communist anti-family values.
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