Interests and Rights in Property, and their Place in Land-use Planning: A Theoretical Investigation

Chapter 1
Interests and Rights in Property, and their Place in Land-use Planning: A Theoretical Investigation

Barrie Needham

Land-use planning is often seen as opposing the market and as restricting the exercise of property rights. Planning is justified by referring to the need for a public authority to act in the public interest. This chapter rejects that line of reasoning. Instead, it focuses on the interests which people have in the way in which land is used. Some of those interests are protected by private law: they are property rights. The holders of property rights can exercise them in the market. Other private interests in land are recognized by the state, but are not given the status of property rights. Those interests are protected by a public authority, using public law, on behalf of its citizens. This is the activity of land-use planning. The resulting land use is the result of people exercising their property rights in a legal context imposed by a public authority in order to protect the private interests of others in land. However, the distinction between interests which are protected as property rights and interests which are protected by land-use planning is not absolute and is the result of a political decision. Using these ideas, this chapter investigates whether some of the goals of land-use planning could be realized by changing interests into rights, in such a way that markets in those rights would realize the desired land use. This chapter goes no further than an investigation of feasibility: it does not recommend replacing land-use planning by markets in property rights.

I start with a working definition of land-use planning. This refers to the activities of public authorities when they try to achieve some politically determined goal by deliberately influencing the way in which land in a certain area is used. The goals aimed at in this way can be various: more efficient production, reducing unemployment, improving conditions in residential areas, reducing accidents from traffic, transport which is more ecologically sustainable, protecting wildlife habitats, making town centres more pleasant, providing more affordable housing, and so on. A public authority expects that if the desired land use is realized, the goals will be (more nearly) reached. So it carries out land-use planning in order to realize that land use.

In this chapter I question neither the legitimacy nor the value of the state trying to influence land use on behalf of its citizens. Nor do I question whether the assumed causal link between the desired land use and achieving the goal is always correct. But I do question the methods by which the public authority carrying out that planning tries to realize the desired land use. The chapter is based on Needham (2006), where the argument is worked out in much more detail, and is a reworking of Needham (2005b).

The usual way of carrying out land-use planning is by making building and development conditional on the granting of a permission, which is given only if the initiative conforms to a plan or policy. We can call this ‘regulation’. However, there is a possible alternative to this, namely creating markets in property rights in such a way that the initiatives which people take (automatically) realize the goals of the planning policy. To the extent that this alternative is feasible, it has possible advantages over the usual way of carrying out land-use planning, both for the citizen and for the planning agency. People are freer in how they decide to use their land and buildings. Also, if people enjoy property rights, they can use them to protect themselves against those who have excessive power. At the same time, people have more responsibility for creating and maintaining their own surroundings. For the planning agency, it would have advantages of less direct involvement, less financial risk, and less risk of freezing land use in a state which turns out to be inappropriate. The question is: is it technically possible to arrange this in such a way that the publicly chosen goals of land-use planning are still met?

To investigate this, we start by looking at how the state can influence the way in which land is used.

Influencing Land Use

Achieving the goals of land-use planning depends on how land is used, not on who owns it. Moreover, under land-use planning, the decisions which people make about using land, although they are restricted, are usually taken voluntarily. In most cases, there is no authority which says how the owner of a parcel of land or building must use it, nor that the owner may not buy or sell, nor who may own what land and who may not: it is not ‘command and control’, even though that term is often applied to it. A public authority which wants to influence the way in which land in a given location is used, needs therefore to understand how the owners make decisions about using their land. The public authority itself has no right to take those decisions, unless it owns the land. Land-use planning will succeed only if it can influence the private decisions.

How can that influence be exerted? The way we are most familiar with is development control. This is how it is described in English planning terms, in other countries it is called the building permit, or the zoning permit, or some such. The content is always more or less the same: if you want to change the use of your land, you must first obtain permission, which is granted only if the proposed change conforms to the land use desired by the public authority. Other ways which can be found in practice are: giving a subsidy to a land-use decision which is desired, or imposing a levy on an undesired land-use decision; persuasion and encouragement to take the land-use decision which the public authority desires; and providing roads and other infrastructure which makes some uses more attractive than others. The decision remains free, but is influenced or constrained. The decision ceases to be free if ownership is taken away, amicably or compulsorily. That is common when no-one besides the public authority is interested in making the desired land-use change, for example providing open space or a road.

Land-use Planning and Interests in Land

Why should a public authority want to influence decisions about land use? The answer is that the land use resulting from all the decisions made by private (legal) persons is not always what the public authority wants. So that authority wants to change those decisions ‘in the public interest’. This formulation I do not find satisfactory. It implies that in a particular area one way of using land is more ‘in the public interest’ than another way. That is exceedingly difficult to substantiate (see, for example, Lucy 1988).1 Economics offers the substantiation in terms of ‘distortions’ caused by external effects, monopoly conditions, public costs, and so on: but those arguments too no longer convince (see for example Lai 1994; Needham, Segeren, Buitelaar 2011).

One of the main problems with the idea of ‘the public interest’ is that it suggests that you and I, as individuals, might have to be constrained or influenced in the interest of ‘the public’. But we too are the public! And who are the other members of the public who will be benefited by constraining us? Talking of ‘the public interest’ has a similar effect to talking – as many economists do – of ‘social costs’ (Bromley 1991: 19). The others, who are affected by our actions, are depersonalized into an amorphous and unidentifiable ‘public’ or ‘society’.

In order to avoid that depersonalisation, we need to look more closely at peoples’ interests in the way in which land is used. It is clear that, if I own a parcel of land, I have an interest in the way in which that parcel is used. But I have an interest too in the way in which my neighbour uses her land, for that can affect me. For example, I do not want her to dig such a deep hole in her garden that the foundations of my house are endangered. And on a larger geographical scale, and whether or not I own land, I have an interest in how others use their land. I have an interest in my neighbour not painting her front door bright pink. I have an interest in how much traffic uses my street. I have an interest in the vitality of the shops in my town centre. I have an interest in the conservation of an open landscape. I have an interest in clean air.

We can now give a different answer to the question: why does a public authority want to influence the land-use decisions made by private persons? It is because the decision by one person about the use of her land can affect the interests of another person. The authority is acting not so much to uphold some general public interest, as to uphold the identifiable interests of many identifiable private persons.

Land-use Planning and Rights in Land

We can conclude that public authorities practise land-use planning in order to protect the interests of people in how land is used. However, the state protects the interests of private persons in land in another way too, namely by creating and protecting property rights. And – it will be clear – those two ways can clash, and often do clash. The right to own landed property includes the right to use that property in a particular way. Moreover, the right of ownership is strongly protected (see for example article 1 of the Protocol to the European Convention on Human Rights: ‘Every natural or legal person is entitled to the peaceful enjoyment of his possessions’). Land-use planning can restrict the exercise of that right. So it is not surprising that land-use planning is often politically contested. Before we investigate further the relationship between a public authority upholding the interests of its citizens by land-use planning, and the state upholding such interests by making of them property rights, it is useful to put the right of ownership in perspective.

Most countries have an extensive legal system of property rights regulating the use of land. The reason is that land use is very important for the functioning of the society, both economically and socially. Property rights give a person security to use a piece of land in a particular way, and that security helps the market to work efficiently and stabilizes social relationships. Landlord/tenant legislation illustrates that well. The landlord has certain rights, the tenant also, and those rights help the market in tenancies to work. Ownership is, however, never absolute (in spite of the statement in article 17 to the ‘Declaration des droits de l’homme en du citoyen’ in 1798 that ownership was ‘inviolable et sacré’). The most important restriction is that the owner is not allowed to use the land in a way which harms others or which restricts others greatly. The dog is not allowed to sleep in the manger, even if he owns it, if the horse has no other source of food. Squatters can claim rights from landowners. How the law regulates this varies greatly from country to country, but the principle is the same everywhere (Honoré 1961). It is the details which are interesting. For in spite of the general principle, most countries do allow the owner of land to use it in ways that harm others, if that use gives more benefit than the harm it causes (Coase 1960).

There is a second type of restriction too, namely when the owner of the freehold right voluntarily restricts herself by granting a partial right to someone else. That other person acquires the right to use the land in a particular way, such as a ground lease: and the court protects the holder of that partial right, if necessary against the owner of the freehold right.

Those two types of restriction have nothing to do with land-use planning. They concern the ‘traffic’ between private legal persons. If one private person harms another, or interferes with the exercise of a right by another, that other (the plaintiff) may take the doer of the deed (the defendant) to court. The action is taken by a private person. The court, of course, has to be a public institution, for it might be necessary to use force against one of the two parties, and the state is the only agency legitimized to use force. But, crucially, the initiative to enforce the restriction is taken by a private person, not by the state. However, the state will not uphold laws which it does not support. It follows that the state must define property rights (or, under case law, it recognizes property rights): what they allow and do not allow, how they will be enforced, the punishment for transgressing a right, and so on.

In order to understand the full significance of this, we have to refine our understanding of a property right. It is a way of using land (and buildings), where that way is recognized by, and protected by, the courts. That addition is of paramount importance. If, for example, I rent my land to a farmer, I give that person rights over my land. If I want to get rid of the farmer in order to sell the land to a housing developer, the courts will not recognize my action if the right which the farmer has acquired from me protects him from eviction. This fact undermines yet further the idea that property rights are or can be absolute, or that they are in some way indisputable, natural or inalienable (as propounded by, for example, Locke in his ‘Two treatises of government’, 1689), for they are created by the state. ‘It is the fact that something is protected that makes it a right, rather than that something is protected because it is a right’ (Bromley 1998). It follows that different state governments can create different property rights. And those international differences exist in practice, as empirical investigation shows, and as the examples later in this chapter illustrate.