One of the many virtues of markets is their ability to turn seemingly intractable conflicts into mutually beneficial trades. For evidence, look no further than a real estate deal in New York City that has managed to make peace between a housing developer and some would-be NIMBYs.
Last week, The New York Times published a story about the residents of a 12-story loft building in Manhattan’s Chelsea neighborhood who, faced with the prospect of a new condo building that would block their view of the Empire State Building, decided to bargain rather than litigate.
The building’s inhabitants offered to buy the air rights from their neighborhood developer for $11 million. Residents on the upper floors paid up to $1 million, people on the lower floors paid less, and those on the bottom floor paid nothing at all. People who didn’t have the cash to pay their full share relied on loans from their neighbors.
In return, developer Gary Barnett ceded his right to build anything other than a three- or four-story structure on his property.
“It’s not common,” Barnett told the Times. “Most of the time, they sue you and try and stop you somehow. These people stepped up to the plate and paid market value for the building rights.”
It’s true that conflicts over new developments are rarely worked out so harmoniously. Often, view-conscious property owners resort to legal or administrative action in order to either stop an unwanted project from going forward or delay things long enough to force a developer into making concessions.
One reason for this is that it’s often much cheaper to weaponize the planning process and the legal system than to work out a voluntary agreement. The stricter a city’s land-use regulations and the more discretion its planning process gives bureaucrats, the more appealing the former option becomes.
In San Francisco, for example, the planning process heavily favors community input over property rights, and planning officials have a lot of power to layer conditions on new developments beyond the city’s already exacting zoning code requires. In addition, California environmental laws make it possible to slow things down with administrative appeals and lawsuits that can take months, if not years, to recolve. With this setup, it’s no surprise that NIMBYs there rely on courts and bureaucracies rather than negotiating like the Chelsea residents.
Reason has covered a number of cases of NIMBY strong-arming in San Francisco, including when a totally zone-compliant single-family home was delayed for more than a year because neighbors resented the loss of a garden that the new house would replace. There have also been multiple cases where apartment projects were delayed because the new buildings would cast shadows.
In each case, project opponents could have tried to buy the land the offending project was to be built on. Or, like the Chelsea residents, they could have offered the developer cash compensation to build a smaller building that would cast fewer shadows.
One benefit of market arrangements like the one described in the Times story is that people have to actually put a price on these competing uses. The relative costs and benefits of building new housing over preserving a great view can be hashed out, and a mutually beneficial outcome can be reached. But when land use regulations stop these normal market mechanisms from functioning, competing interests are funneled into bureaucratic systems where the process is driven by politics and decisions have clear winners and losers. The result is an incessant conflict.
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