Over at Market Urbanism, Emily Hamilton lays out the argument that inclusionary zoning violates SCOTUS’s Nollan/Dolan standards for exactions. Hamilton has helped write an amicus brief submitted
Comments
@brad and @PaulB. I enjoyed these comments – thanks. There’s a serious point, though, namely that it is much easier to get officials to act when you deliver them private goods (“the Chicago way”) than when you offer them the public good of a more affordable city. Rick & David S. have a 2015 piece that gets at this; the key is to design your bribes in ways that are transparent and accessible to the public, so that (hopefully) the results are more likely to satisfy some kind of cost-benefit analysis, everyone can play, etc.
Posted by: BDG | Jul 5, 2017 5:33:34 PM
For those of you who think Brad is kidding (including Brad?), I worked for a development firm looking to build a high rise office building in both San Francisco and Chicago around the same time. In San Francisco, we hired an endless number of lawyers, environmental consultants, community outreach specialists, and every other specialty you could imagine with no guarantee that we would have the right to build anything after 3 to 5 years. In Chicago, we hired a small law firm recommended to us by our Biglaw firm (“you need a specialist for this”) in the city. The kind of firm that billed like they were Kirkland and Ellis but had all their paralegals taking every Election Day off to work as Precinct Captains. The project went through in eight months.
Posted by: PaulB | Jul 5, 2017 5:15:08 PM
@BDG Looking at the program through the lens of property taxes and expenditures make it even clearer how stupid these programs are. At least in NYC the affordable units are paid for not just by zoning waivers, but also by gigantic tax abatement. The net present value of the rental benefits are generally less than the net present value of the tax abatement, so if you converted the rental subsidies into a property tax you’d have a residual tax abatement plus zoning waivers in exchange for nothing. Then, in order to replicate the other side of the transaction, you’d have to pay out of general funds rent on some of the most exclusive properties in the country and give away the rented apartments by lottery. Because that’s clearly an efficient way to spend government money.
I think outright corruption, cash in bags style, would produce a net superior outcome to these kind of programs. If we need play in the joints to get buildings built maybe we should encourage the US Attorneys to stop investigating local government officials for corruption.
Posted by: brad | Jul 5, 2017 4:05:41 PM
In effect, the libertarian position is a rejection of Rawls’s veil of ignorance/original position concept. In this instance, the position in question is “property ownership at the moment of the transaction under scrutiny.” The libertarian position makes sense if, and only if, that ownership is ipso facto reified (and validated) as both just and economically efficient. One need not go so far as “$24 and a barrel of whiskey for that island over there” to see that there are… problems… with making such an assumption universal. The libertarian-property-policy difficulty is that examining the assumption is prohibited in all instances.
One fundamental problem with takings law — and there may not be a way to “solve” it in a principled fashion — is that it attempts to take a moment-in-time snapshot of a single electron when the policy in question was designed to regulate stereoisomer configuration of a complex kilodalton molecule.* The libertarian position presumes that one can form proper molecule-level “policy” by some form of simple accretion of these snapshots… or, too often preferably, have no policy at all simply because the snapshots don’t accrete in a simple, arithmetic fashion. Of course, the converse case is ethically inappropriate: It is inappropriate to presume that any impairment of a given electron is justified per se by the beneficial molecule. Thus, I can’t see a principled solution that does not require breaching the veil of ignorance.
* I can’t help that I was a biochemistry undergrad.
Posted by: C.E. Petit | Jul 5, 2017 11:46:35 AM
This whole doctrine is baffling to tax people, or at least this tax person. Is there any doubt the city could impose a property tax on new development and earmark it for affordable housing? And, eh, how is that different than affordable-unit requirements? Further, to the extent that the mandate is economically equivalent to a property tax, we should think that the incidence falls not on developers, but instead on capital markets … that, as Rick knows, is the “new view” of the incidence of the property tax. So nothing has actually been taken.
So I think the more intriguing questions, presumably not on the menu for the Supreme Court, are those of institutional design – i.e., should I condemn these laws because they’re stupid? I accept the Baumol & Oates point, translated to this context by Ellickson, that the tax has ambiguous effects on output; an affordable-housing subsidy paid out of general tax revenues would *un*ambiguously increase affordable housing. Why, then, do cities choose this mechanism? Is it just to get the subsidy “off budget”? Is there a political economy story, as you hint at Rick, that explains why this is the only available mechanism for delivering subsidies?
Posted by: BDG | Jul 5, 2017 9:57:32 AM
Inclusionary zoning often allows the developed to build more units than the current zoning allows so that he/she will provide the “affordable” housing units AND build the other units that sell at market price.
Posted by: Paul | Jul 5, 2017 12:36:38 AM
Inclusionary zoning is the practice of demanding that developers rent some percentage of their housing units at below-markets rates as a condition for permitting the developer to build market-rate units.
Awardable housing! With scant doubt the people who get the concessionary rents will be connected to local Democratic pols.
“Inclusionary zoning’ is a nice bit of marketing for what’s known colloquially a ‘extortion’ and ‘graft’.
Posted by: Art Deco | Jul 3, 2017 4:58:59 PM
If libertarians could give up their love of localism, which is even really a libertarian doctrine to begin with, the solution would be staring them in the face.
A councilman or even mayor may worry about upsetting the residents of Bernal Heights or the East Village, but a Senator or President won’t care.
Posted by: brad | Jul 3, 2017 7:30:55 AM