Developers Should Be Able To Bribe Homeowners

Moneybox
A blog about business and economics.
Feb. 14 2012 2:31 PM

Developers Should Be Able To Bribe Homeowners

Kevin Drum says we should just ignore everything everyone says about local development and just focus on noise and traffic congestion:

I'm certainly concerned about those things in my neighborhood, and I'd be unhappy if someone wanted to erect a 50-story skyscraper next door that turned the street outside my door into a seething, 24/7 stream of cars and weekend partiers. And unfortunately for prospective developers, that's an externality that's very difficult to mitigate. You can reduce it, maybe by paying for a street widening project or some such, but that's small beer. And in theory, you could simply pay off local residents. I might not like all the new traffic and noise, but if you paid me $5,000 a year to put up with it, maybe I'd mind it a lot less. But who do you have to pay? And how much?
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This seems to me to be on the right track. But I suspect that Drum intended it in the spirit rhetorical questions aimed at encouraging people to stop complaining about senseless NIMBYism. My view is that we should actually take it seriously. The current practice in urban real estate is that when you own a patch of land you have extremely weak rights to dispose of your property as you see fit. In exchange you get an ill-defined veto power over all your neighbors' property. If we made this more explicit and better defined—exactly who gets to veto what and how many nays does it take to veto something—then we'd be on the road to the kind of side-payments and Coasian bargaining that Drum is talking about. In a payoffs system, we'd have more property development with all the broad metro-wide benefits that brings plus people would reap the benefits of payoffs. There's probably no unambiguously correct answer as to how the conditional veto rights should be defined, but it's okay to be a little bit arbitrary. The difficulty with the present system is that the question "who would I have to pay off to do this" simply lacks an answer in many cases.

Another important point I do want to make about this is that it's not possible for everyplace to get more crowded simultaneously. A long-run equilibrium facing less restriction on the creation of dense, crowded, noisy neighborhoods would also increase the number of bucolic, quiet, low-density neighborhoods. It's just that the specific locations of the neighborhoods might be different with the crowded ones existing in the places where the most people want to be. And at the end of the day where else should the crowded neighborhoods be if not the places people want to live?

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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