On Property

On Property July 28, 2010

Property is one of those things that should be simple enough to discuss.  The tendency though is to define it.  And once it is defined, the tendency is to treat the definition as immutable.  Property however isn’t a simple thing.  It is a social construct.

To start, let’s take a simple example.  George has been working at a factory for 15 years.  XYZ corporation decides that George is too old.  They take George’s job and give it to Larry.  Other than age, there is no change in compensation scheme or ability.  Was George the victim of an unjust taking?  In the present generation, most would say no.  An older generation may have argued that XYZ corporation has a duty not to arbitrarily and capriciously remove George from his position.  They would have argued that perhaps giving George’s job to Larry could have been justified were Larry significantly more skilled or seeking significantly less compensation.  On what basis would they argued that George was mistreated?  They would have argued that taking away George’s livelihood presents a significant cost to George and his family.  They would have argued that those costs could reverberate to the whole community.  While some will surely doubt me here, we have already legally proscribed many similar things.  For example, it is illegal to fire a woman for getting pregnant.  We have banned age discrimination.  In many ways a man’s work is his property.

As our elderly become more numerous and as areas experience boom times, the taxes on homes can rise significantly.  Increasing taxes and a fixed income then combine to leave the elderly person without a home.  Sure, they can get another house, but, when you have lived in a place for over 20 years, that is where home is.  Many folks see this as an injustice.  These folks have gone to state houses and enacted laws limiting the amount property taxes can go up.  In some states, seniors are able to defer property taxes until death or have been exempted from their properties being assessed at market value.  (See Illinois for example.)  Life is different if you are an elderly renter.  If you are an elderly renter, you can see your rent increased without limit except where proscribed by a handful of cities.  Supporters of cities that provide renter protections and limit increases in rent are called unenlightened.  The belief that people should be secure in their dwelling is of course unenlightened in this day and age.  Starving the beast of tax revenues by giving subsidies to seniors is of course okay.

Too often property discussions obsess over title.  US society is very much title obsessed.  Over the past couple decades, there has been a proliferation of timeshares and condominiums.  They are terrible ownership structures.  In practice, cooperatives tend to behave like corporations on run-out.  They can do basic things like keep the yard mowed or even regular and complex things like keep the water park running.  They do not anticipate trends, and they are generally unable to capitalize on them even if they recognize them.  In practice, a cooperative will start a death spiral once it loses 20% of its members.  I’m not speaking of churn, but of losing.  Once that point is crossed, there is a deficiency in dues payments.  The reserve fund is found to be inadequate, and then fees and dues are hiked to make up the difference.  Once those are hiked, the NPV of existing units is reduced.  Since there are alternatives to coop goods, people begin fleeing.  When an ownership structure is such that in practice you need near unanimous agreement, the organization will be generally not led at all.  It will be coaxed along with the hope the boat won’t be rocked.  In the end, the only thing folks really were looking for was security in their home or vacation rental.  Proper regulation would have allowed ownership (control) without title, allowing both a functional property to be operated and secure dwellers.  Why doesn’t the free market do this on its own?  A bird in the hand is worth two in the bush.  Particularly with our present bankruptcy laws protecting downside risk, maximizing current income and income potential is worth more than hedging against downside risk.


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