Urban Institute Press • 2005 • 494 pages • $32.50 paperback
In Private Neighborhoods and the Transformation of Local Government, Robert H. Nelson effectively frames the discussion of what minimal government might look like in terms of personal choices based on local knowledge. He looks at the issue from the ground up rather than the top down.
Nelson argues that while all levels of American government have been expanding since World War II, people have responded with a spontaneous and massive movement toward local governance. This has taken two main forms.
The first is what he calls the “privatization of municipal zoning,” in which city zoning boards grant changes or exemptions to developers in exchange for cash payments or infrastructure improvements. “Zoning has steadily evolved in practice toward a collective private property right. Many municipalities now make zoning a saleable item by imposing large fees for approving zoning changes,” Nelson writes.
In one sense, of course, this is simply developers openly buying back property rights that government had previously taken from the free market, and “privatization” may be the wrong word for it. For Nelson, however, it is superior to rigid land-use controls that would prevent investors from using property in the most productive way. Following Ronald Coase, Nelson evidently believes it is more important that a tradable property right exists than who owns it initially.
The second spontaneous force toward local governance has been the expansion of private neighborhood associations and the like. According to the author, “By 2004, 18 percent—about 52 million Americans—lived in housing within a homeowner’s association, a condominium, or a cooperative, and very often these private communities were of neighborhood size.”
Nelson views both as positive developments on the whole. They are, he argues, a manifestation of a growing disenchantment with the “scientific management” of the Progressive Era. He thinks the devolution of governance below the municipal level to the neighborhood should be supported through statutory and state constitutional changes.
Although about one-third of all new housing since 1970 has been built within some form of neighborhood association, the majority of older neighborhoods fall outside this trend. Establishing neighborhood associations in these areas is difficult because the requirement for a homeowner to join is typically written into the deed, and this would be extremely costly to do for every home in an older neighborhood.
Nelson proposes a six-step solution that involves (1) a petition by property owners in a neighborhood to form an association, (2) state review of the proposal, (3) negotiations between the city and the neighborhood, (4) a neighborhood vote on the proposal, (5) a required supermajority, perhaps 70 percent, for passage, and (6) a transfer from the municipality of legal responsibility for regulating land use in the neighborhood to the unit owners of the association.
The sticky point from a classical-liberal perspective, of course, is what happens to the rights of the minority of residents who might oppose the proposal. For Nelson this would be a cost of creating a more liberal society in the long run. But many will object to his advocacy of political means to transform established neighborhoods into private ones.
Others may find overstated his claim that “the rise of private neighborhood associations in the United States has probably resulted in a greater reduction in individual freedom of action than any other social development of the second half of the 20th century,” calling it “private socialism.” Nelson’s point, however, is that these trends have tended to constrain the daily choices of Americans even as they have decentralized governance. On the other hand, he correctly points out, invoking F. A. Hayek, that local governance is apt to be more responsive to local concerns than traditional centralized municipal government.
Nelson’s vision extends far beyond a nation in which all residences are part of a homeowners association. First, private governance will not be limited to residential communities, but will extend to business and community-improvement districts as well. Second, he sees these private neighborhoods as mostly self-financing—with the city and county rebating taxes for those services funded and provided by the associations themselves—and empowered to decide the mix of land uses that accord with their own residents’ demands.
There is some concern that private neighborhoods would permit objectionable discriminatory practices. Nelson responds that this not only reveals a tendency to regard ordinary people as bigots, but more important, it also ignores the role of “exit,” or competition among communities, in constraining the powers of local authorities. “Other things equal, citizens will prefer more and smaller local governments to fewer and larger governments,” he says. Widespread and effective local governance will, on the whole, offer a wider range of choice to individuals, as the lower cost of moving from one private neighborhood to another increases any inhabitant’s threat of competitive exit. Nelson further argues that imposing a uniform ideology or moral code is no solution, except for the broadest strictures against aggression and fraud, because this would make the attempt to form individualized neighborhood governance pointless.
Nelson seems to be proposing a kind of minimalist polyarchy—the Greek polis in modern form. With the exception of certain macro-services such as regional defense, governance would consist mostly of choices made by the inhabitants of one’s own neighborhood. Governance and centralized government are not the same thing.
Sandy Ikeda
Sandy Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He is a member of the FEE Faculty Network.
This article was originally published on FEE.org. Read the original article.
I’ve been mulling over the idea that private neighborhoods wouldn’t really be much better than existing local governments, at least not with respect to what I think are the core problems with urban housing: (1) housing is very expensive because of restrictions on its supply; and (2) there’s not enough political energy to make additional supply of housing less expensive.
In the US – and most of the world too? – ‘exit costs’, i.e. moving to another locality, are about as low as possible, if we ignore the costs of moving *to* another locality separate from the costs of physically transporting oneself, one’s family or other household members, and everyone’s stuff. The additional costs are really an instance of the core problem (1). But private neighborhoods seem likely to be just as ‘bad’ as existing localities in settings those ‘prices’.
Lots of existing residents – ‘incumbents’ – are effectively enjoying economic rents in the form of barriers to entry in the form of new residents competing for access to the amenities of their locality. I can’t think of any compelling way to persuade anyone of foregoing those benefits.
Here’s a specific puzzle related to all of this: NYC, and other cities, proudly claim to be ‘sanctuary cities’, i.e. explicitly holding down specific ‘costs of living’ (e.g. immigration enforcement) for specific current, and potential future, residents. But how can that work in practice? Is part of their being sanctuary cities also that they don’t discriminate against people having illegally immigrated to their country in allocating subsidized housing via lottery or similar? Is another part their effectively not enforcing, or enforcing only lightly and irregularly, laws and regulations pertaining to housing, e.g. the number and manner in which people occupy particular units?
I’ll admit I don’t understand what’s workable or sensible with respect to any of this. I’m willing to bite the bullet with respect to open borders and accept that that’s likely to mean lots of new ‘favelas’ springing up in the cities and metro areas of richer countries. But for those *not* willing to bit that bullet, is there a coherent and consistent way to justify the ambiguous treatment of people and places legally and politically? Right now it all just seems *too* messy, and thus too ripe for cheating and fraud and widespread abuse.
Home owners associations should not be eliminated, but it should be clarified that they are the government, and subject to the limitations thereof.
As Marohn and Sanphilippo love to point out, the burdens of decaying infrastructure in older low density subdivisions are difficult to bear, and it would be nice if an HOA not a city had to bear them.