Government regs erode private property rights

Real Estate Weekly, Dec 4, 1991 by Sheldon Lobel

Government regs erode private property rights

Recently, Professor Ronald Coase of the Chicago Law School became the first law school professor to win the Nobel Prize for economics. Professor Coase won the Nobel Economics Prize for theories that help explain why companies exist and why communist economies collapse. (He wrote these theories long before the recent collapse of communism in the world.) Professor Coase is a practical economist who has studied and written about the complex relationships among property rights, related legal rights and regulatory inertia. He challenges the prevailing view that outside factors require deep-seated government intervention in the establishment of property rights. Coase's arguments create a direct challenge to the unnecessary role of government and the need for government to get in the way of providing the best solution to property rights. I wonder what Professor Coase would say about the regulatory process in New York City where:

I) The city and state, for almost 50 years, has stringently regulated the relationships between landlords and tenants. You don't need a Nobel prize to understand that regulatory inertia has stifled and burdened the residential marketplace since the end of World War II. Can anyone say that the Division of Housing and Community Renewal (government intervening in the rights of landlords and tenants), with all its regulatory inertia and bureaucratic maze, time delays and costs, makes for an efficient economic use of housing in this city?

II) Ask any architect or developer about the effect of the Zoning Resolution on the development process in New York City. Cumbersome, over-restrictive and costly regulation thwarts development. The Zoning Resolution, which originally contained 16 pages, now has over 800 pages. Layer upon layer of regulation slows development and increases the cost of development and ownership of property.

III) In addition to zoning and building regulation, historic preservation has a tremendous impact upon real estate ownership and development. The landmarking of a property puts a burden on one property owner for the benefit of the public. After a building is landmarked or an historic district is designated, government (through the landmark laws) forces the owner to face burdensome restrictions on his property. While the owner is required to dedicate his property for public aesthetic and educational purposes, he receives no compensation. I believe this is an unconstitutional taking of property without just compensation in violation of the guarantees of the United States Constitution.

Under the United States Constitution, there are specific protections of both personal and property rights. During the last 50 years, while personal rights (speech, press, assembly, etc.) continue to be protected, basic private property principles have been eroded through the application of rent control, zoning, wetland and historic preservation laws. The pendulum of regulations has now swung so far that the economic development of our city is threatened. Our government officials must act to stop the anti-development attitude found in the zoning, landmark and rent regulations which is further exacerbated by the agencies that have the regulatory power over development.