Tag: property rights

Alexander Hamilton: Defender of Property Rights

Treasury Secretary Jack Lew’s proposed degradation of the ten-dollar bill (read: the removal of Alexander Hamilton as the featured figure on the ten-spot) is wrongheaded. In addition to being the first and most distinguished U.S. Treasury Secretary and a renowned journalist, Hamilton also excelled as a lawyer and defender of property rights.

Yes, Alexander Hamilton was a distinguished lawyer. He took on many famous cases out of principle. After the Revolutionary War, the state of New York enacted harsh measures against Loyalists and British subjects. These included the Confiscation Act (1779), the Citation Act (1782), and the Trespass Act (1783). All involved the taking of property. In Hamilton’s view, these acts illustrated the inherent difference between democracy and the law. Even though the acts were widely popular, they flouted fundamental principles of property law. Hamilton carried his views into action and successfully defended — in the face of enormous public hostility — those who had property taken under the three New York state statutes.

Hamilton’s influence on creating a respected national judiciary and shaping American jurisprudence was significant and widely recognized during his lifetime. For example, the Chief Justice of the U.S. Supreme Court John Marshall was known to have said that he was a mere schoolboy next to Hamilton. Indeed, in three of Marshall’s landmark decisions – Marbury v. Madison (1803), Fletcher v. Peck (1810), and McCulloch v. Maryland (1819) – he turned to Hamilton’s legal writings for guidance.

Alexander Hamilton is one of America’s most acclaimed Founding Fathers. He should remain as-is on the ten-dollar bill. Anything else would be an insult, the kind of thing that once engendered a duel.

The Grapes of Wrath: California Raisins Are Back at the Supreme Court

When Marvin Horne told the United States Raisin Administrative Committee (yes, there’s a raisin administrative committee) that he wasn’t going to turn over nearly 30 percent of his crop to the government in exchange for nothing, he probably didn’t expect his case would go to the Supreme Court—twice. That little act of civil disobedience was thirteen years ago, and the Hornes now stand on the precipice of vindicating an important constitutional right—the Fifth Amendment right not to have your property taken without just compensation—as well as putting a wrench in the gears of what Justice Elena Kagan called “the world’s most outdated law.”

Like much of our agricultural policy, the Raisin Administrative Committee (RAC) is a relic of New Deal-era cartelization schemes. Trying to understand the logic behind American agricultural policy is like trying to find the logic in a Marx Brothers movie—it can’t be done and you’re better off just sitting back and laughing at the antics. Yet our agricultural policy has real-world effects on farmers like the Hornes, who are subject to the whims of the RAC as it tries to stabilize the price and supply of raisins. Sometimes the RAC pays for the raisins it takes, and sometimes not. In 2002-2003, the RAC offered far less than the cost of production for 47 percent of the Hornes’ raisins, and in 2003-2004 they offered nothing for 30 percent of the raisins. The Hornes had had enough, and they refused the order, arguing the seemingly simple point that the confiscation would be a taking without just compensation under the Fifth Amendment.

An Innovative Way to Title Property in Poor Countries

Over the past couple of decades, a consensus has emerged among development practitioners and over a broad ideological spectrum about the need to legally recognize and protect the property rights of the world’s poor. Yet land tenure and the holding of other forms of property of billions of poor people remains informal.

As Peter Schaefer and Clay Schaefer explain in a Cato study released yesterday, one reason there has been little progress in titling or registering the property of the poor is that powerful interests in developing countries block reform. And in countries that have particularly predatory governments, there may be little actual demand to title property. Why would you publically register your property if the result will be confiscatory taxation, political persecution, or the need to pay bribes to avoid complying with prohibitively expensive regulations?

The authors propose a novel, bottom-up approach to registering property that gets around those problems: using a simple, hand-held GPS device, individuals in poor communities can inexpensively map their property claims in an informal community registry that is publically accessible on the internet. In the vast majority of cases, there is already a consensus about what informal property belongs to whom, so disputes on boundary issues that might arise are typically not significant and are readily solved. This community mapping approach is already partly being employed in parts of Africa and India. Because such registration is voluntary, it would only take place where people actually demand it; and because it is informal, it need not rely on unreliable government bureaucracies to make it happen.

Were communities to create “live” documents of their registries on the internet, as the authors propose, they would increase tenure security by providing useful information to investors, neighbors, multinational corporations and even governments. As Peter and Clay Schaefer note, “When a community achieves a critical mass of registered users, it will be very difficult for their governments to ignore the claims that have been recorded.” That approach will also make it more politically feasible for poor people to negotiate with the authorities and gain formal title to their property.

Ignoring the Law of Supply and Demand

A recent report from Fannie Mae finds that baby boomers are not leaving their comfortable suburban homes for lively inner-city communities with walkable streets. As a news article about the report observes, this challenges the “conventional wisdom that ‘empty nester’ baby boomers would eventually downsize from the homes where they raised families, flocking instead to apartments or condos.”

Rather than conventional wisdom, it would be more accurate to say that this notion was wishful thinking among urban planners who believe more Americans should be packed into high-density “compact cities” where they will get around by foot, bicycle, or transit rather than by automobile. In contrast, demographers have known that populations of virtually all age groups, whether millennials or empty nesters, are growing faster in the suburbs and exurbs than in the cities. After all, the baby boomers’ parents overwhelmingly preferred to “age in place” rather than move when their children left home; why should baby boomers be any different?

Despite this, regional planning agencies all over the country are writing plans that presume America will need no more single-family homes, especially on large lots, and instead will need lots of apartments, condos, or townhouses. Many of these plans effectively zone away the possibility of new single-family homes on large lots while they subsidize construction of high-density housing. For example, the San Francisco Metropolitan Transportation Commission’s Plan Bay Area mandates that 80 percent of all new housing be in high-density urban centers.

To justify these plans, the planning agencies often hire Arthur C. Nelson, the University of Utah urban planning professor who in 2006 predicted that the U.S. will soon have 22 million surplus single-family homes on large lots. Nelson wrote a 2011 report predicting that the Bay Area, which has one of the most acute housing shortages in America today, would have a surplus of nearly 572,000 single-family homes by 2040; Plan Bay Area relied heavily on this report to justify its strict land-use policies.

The Right to Own Includes the Right to Rent Out

Since 2005, the city of Winona, MN will not grant rental licenses to property owners if more than 30 percent of the lots on their block already have rental licenses (the 30% “rule”). The rule contains a “grandfather clause,” however, that allows property owners who had licenses prior to the rule to continue renting even if their block has already reached the 30 percent threshold. Therefore, many blocks in the city violate the rule, which the Minnesota Supreme Court is now reviewing.

Cato has filed an amicus brief, joined by the Minnesota Free Market Institute at the Center of the American Experiment, supporting the property owners challenging the rule. We argue that the rule is an arbitrary, inefficient, and unconstitutional restraint on an essential and fundamental property right because it strips property owners of their right to manage and enjoy their property at the result of actions of their neighbors. The rule also damages communities by reducing property values and creating inefficiencies in the local economy and housing market without a substantial government interest.

First, the rule is a significant intrusion into the fundamental rights of residential property owners because it denies the right to rent—one of the three principal ways to use a property—and significantly limits the right to sell. In addition, since the rule restricts fundamental rights, it needs to be tailored to achieve a legitimate government interest to be held valid—but the rule is both over-inclusive and under-inclusive.

Second, the right to rent is too important to restrict with an arbitrary limit on rental licenses. The rule isn’t an effective way to protect “community character”—its purpose according to the city—especially given the fact that the law has many exceptions and is applied arbitrarily. For example, the rule favors currently licensed property owners and encourages them to add rental properties to their lots, thereby defeating the asserted goal of avoiding rental clustering. Finally, the rule harms communities by artificially depressing property values and increasing the probability of vacancy. It further fails to rationally address the city’s other concerns. For example, one of the rule’s ostensible purposes is to reduce student-housing-related nuisance complaints, but it still allows large groups of students to live together in “theme houses.”

For these reasons, the Minnesota high court should reverse the lower courts’ ruling and protect the full constitutional rights of Minnesota property owners.

(Full disclosure: My condo building established a similar rule a few years ago because, due to federal regulation, it’s hard to get lenders to approve mortgages to finance purchases in buildings with a high rental quotient. Because I’m one of the original owners in my 7-year-old building, my unit is grandfathered in—except the condo board is now trying to apply the rental cap even to owners who predate the rule. It hasn’t come to litigation yet and the issue here is contractual rather than constitutional or statutory—and I don’t plan to rent out my place any time soon—but this episode just reinforced for me the practical importance of the high-fallutin’ principles Cato defends.)

Connecticut, Drunk on Power, Uses Bottle Bill to Steal Money

For nearly 30 years, Connecticut beverage distributors received the unclaimed refund value of recycled bottles as part of the state’s Bottle Bill, which set up a refund system for used bottles as an attempt to encourage recycling. As in other states, the law requires beverage dealers to pay refunds for every bottle turned in.

Fiscal troubles in 2008 prompted Connecticut to amend the law, however, to require a “deposit account” from which distributors were to pay the refunds. This requirement was intended to aid the state environmental agency to study the rates of deposit payments and returns. The following year, the fiscal situation worsened, and the Bottle Bill was again amended, this time to require the remaining funds in the deposit accounts (after returns were paid out) to be paid to the state—retroactively including any unpaid remainder funds since the accounts went into effect in 2008.

A. Gallo & Co. and other beverage distributors in Connecticut saw this as an uncompensated taking of their property and sued the state. They took their case through the state court system, but even the Connecticut Supreme Court turned a blind eye, holding that beverage distributors never had a property right in the remainder funds in the first place. The distributors have now asked the U.S. Supreme Court to hear their case, and Cato joined the New England Legal Foundation, the Southeastern Legal Foundation, and the National Federation of Independent Business on a brief supporting their petition.

We argue that Connecticut’s budgetary troubles are no excuse for violating a longstanding property right without compensation. Moreover, by twisting its statutory interpretation to satisfy political pressures, the Connecticut Supreme Court has made itself complicit in the uncompensated taking. It’s bad enough when strapped-for-cash legislatures unfairly force public burdens onto the shoulders of private parties to feed their spending addictions, but when all three government branches – including the one entrusted with soberly interpreting the law, especially in times of fiscal emergency – get drunk on power and deny even the existence of a property right, it’s time for a Supreme Court intervention.

The Supreme Court will decide by winter’s end whether to take the case of A. Gallo & Co. v. Esty.

The Supreme Court Takes up Old-Timey Property Rights

In the 19th Century, when railroads were being built across the West, the federal government granted significant land and benefits to railroad companies. The Great Railroad Right-of-Way Act of 1875 empowered the government to grant railroad companies right-of-way easements to build tracks across others’ land to facilitate the expansion of the nation’s railways – that is, railroads were granted a right to use sections of another’s property for railroad purposes without owning title to the land underneath. In 1976, the government sold the Brandt family a parcel of land in Wyoming which was crossed by one of these railroad easements.

In 2001, the railroad that owned the easement formally abandoned all claims to it.  Typically, when this happens, the easement is simply extinguished and the owner of the land may then use the former easement however he or she wishes. But the federal government had different plans for the thin strip running through the Brandts’ land. In 2006, the government sued for title to the land lying under the former easement on the theory that it had retained a “reversionary interest” in the land when granting the railroad the right of way easement, even though it never actually set aside any interests when granting the easement.  The government thus claimed that after the railroad abandoned the easement (after only ever owning an easement and never full title to the land), full title to the land “reverted” back to the federal government. The Brandts argue that under the basic principles of the common law of property, the government had no such right, and that even if any legislative act allowed the government to somehow acquire their land, such an act would require payment of just compensation under the Fifth Amendment’s Takings Clause.

Although this may seem like a small, unique problem, the scope of the Old West’s railway system was huge and those old easements criss-cross the land of thousands of property owners. In 1983, Congress amended the National Trails System Act to allow the government to take abandoned railroad easements and turn them into land for public recreation and “railroad banking.” Landowners have been fighting the taking of their property under the Trails Act ever since, claiming, as here, that the government’s original grant to the railroads contained no residual right of possession for the government.

After the trial court rejected the government’s radical claims, the U.S. Court of Appeals for the Tenth Circuit split with the Seventh and Federal Circuit courts (and ignored some of its own precedent on the way) and held that the government did indeed have a reversionary interest in the land, even though it never actually carved itself an exception, as the law requires. The Brandts, faced with the uncompensated government confiscation of a strip of land cutting their property in two, have now brought their case to the Supreme Court in an attempt to keep the government’s hands off their land and off the land of thousands of other landowners in their same position.

After supporting the Brandts’ request for Supreme Court review, Cato, along with four other groups and several property law professors – including Richard Epstein – has now filed a brief supporting the Brandts’ fight against the government’s poorly justified land-grab. We argue that the Tenth Circuit’s decision threatens to unsettle longstanding presumptions of property law because it willfully ignores basic differences between easements and “fee estates” in land and other basic principles of property law like the “strip and gore” doctrine (which holds, for example, that land under a right-of-way is split down the center and owned by those who own the land on either side of the easement).

This case is important, because there are many thousands of miles of old railroad rights-of-way crossing the countryside that would be potentially subject to uncompensated government confiscation if the Court were to follow the Tenth Circuit’s approach.  In addition, some 3,000 to 4,000 miles of old railroad easements are abandoned every year. It’s not entirely surprising that the government would go full throttle on such a shoddy legal argument for the chance to be able to snatch this land back without having to pay for it. The surprising thing is that the Tenth Circuit green-lighted it. We urge the Supreme Court to switch tracks.

The Court will hear argument in Brandt v. United States on January 14.

Cato legal associate Julio Colombo co-authored this blogpost.

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