Correlation, Causation, or No Connection?

The question posed in the title of this post is what makes the task of interpreting economic data (indeed, any scientific data) very difficult.  It is also why it is impossible to just “follow the data.”  Theory, properly rationalized, must be present in order to make sense of data and evaluate whether it makes sense or not.

Allow me to start with a silly, but 100% true, example:

Every time I have watched a New England Patriots game from start-to-finish on TV for the past 16 seasons, the Patriots have won.  That’s quite a lot of data points over a decently long period of time.  It’s a correlation of 1 (perfect correlation).  If we were to just “follow the data,” one could claim that I somehow cause the Patriots victories.  After all, the correlation is there.  Of course, such a conclusion would be erroneous.  By simply pointing to the theory that it is good coaching and good players that affect the outcome of the game, not someone watching a game in Massachusetts/New Hampshire/Virginia, one could easily refute the claim.  Further, if the claimant replied “you’re just being ideological!” in defense of his argument, he would be rightfully ridiculed.

While rightfully derided in sports situations, this kind of analysis is distressingly common in economic situations.*  A perfect example is this NELP study and response by Nick Hanauer.  Both do exactly the kind of poor analysis I mentioned above; by only looking at minimum wage’s correlation with employment growth (and no other factors), it leads to the incorrect conclusion that the Law of Demand is a “scam.”  It’s pretty strong words to call a scientific law a scam based off of one flawed study’s conclusions.  Going back to my example above, this would be akin to claiming “Bill Belichick and Tom Brady are scammers because this study proves Patriots victories are related to Jon Murphy watching the game!”

Unfortunately, these same kind of poor analytical outcomes are legion.  To quote a list provided by Don Boudreaux:

 Forcing wages up by legislative diktat helps workers exclusively at the expense of business owners or rich consumers – or maybe even at the expense of no one at all?  Check!  Allowing people to buy especially low-priced imports harms the domestic economy?  Check!  Trade deficits are both a signal and a source of domestic economic decline?  Check!  The destruction by natural disasters of buildings, inventories, and infrastructure is really an economic blessing?  Check!  Markets unregulated by politicians and bureaucrats poison consumers with foul foods, kill homeowners with shoddy construction, maim workers with perilous workplace conditions, and cheat savers with fraudulent investment services?  Check!  The simple key to a booming economy is maximum spending, especially by government?  Check!  Government debt held by that government’s citizens is no burden upon that economy because we owe it to ourselves?  Check!  Growing income and wealth inequality means stagnant economic fortunes for the middle class and increasing poverty for the poor?  Check!  In markets lightly regulated and lightly taxed by governments, the rich get richer and the poor get poorer?  Check!  In markets women, blacks, and other minorities are underpaid because of discrimination – a problem that can be solved only by government regulation?  Check!  Economic growth devours precious resources, making these resources ever-more scarce?  Check!  The more you “buy local” the more you enrich your community and protect the natural environment?  Check!  Free lunches abound?  Check!!

Each one of these conclusions, which fly in the face of theory, are very popular (for various reasons), and yet they all suffer from the same problem I mentioned earlier.

Economic analysis is difficult.  One shouldn’t be so willing to discard theory lightly.  The important question to ask, regardless of the field, is this: “Does this make sense?  What else could be influencing this?”

*I suppose other sciences it is as well, but I do not know enough about them to say anything definitive.

44 thoughts on “Correlation, Causation, or No Connection?

  1. You make an excellent point. Correlation does not prove causation. Many people are willing to play games with data in order to advocate for a politically correct (but always economically wrong) cause or to sell you something. Buyer beware! Government is not protecting you.

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  2. Well, I would like to see a comprehensive perspective on chronic trade deficits.

    Okay, the US imports $500 billion a year in net goods and services in a world of managed national trade relationships.

    Short story, there is no free lunch. So, the US sells $500 billion in assets, including housing.

    But housing stock is limited by property zoning.

    Price of housing rises.

    Also, if we accept free trade in labor, an unlimited number of immigrants enter the US. Price of rental housing rises,

    Remember, housing stock is limited by property zoning, which is embraced by a powerful propertied class to keep values up.

    The solution, from a free trade or libertarian perspective, is the outright and complete abolition of property zoning.

    Has Jon Murphy made that sentiment a centerpiece of arguments? Have you ever said, “We need a constitutional ban on property zoning?”

    Here’s my rap: “Due to the imperatives of global free trade, you no longer have the right to zone property in your neighborhood. Please step aside for the bulldozers.”

    Well, that is a honest sentiment, anyway.

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  3. Mr. Cole,

    The trade deficit. The $500 MM in assets sold remain in place, including the houses. These assets continue to serve and compete within the US economy, they don’t disappear. Property in New York sold to residents of China has no more ill effect than if it were sold to residents of Kansas.

    If the assets are actually shipped to China, then they are included in the balance of trade accounting and don’t show up as a trade imbalance.

    Zoning can be inefficient, but is not a reason to prohibit people from selling houses to future residents coming from China or Kansas.

    Immigration. If an immigrant can move to New York and earn a living, then everyone benefits. The same is true for “immigrants” from Kansas. If he can’t earn a living and is living with government support, then that is a burden on all productive people in New York and maybe the US. So, don’t give him government support.

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    • Andrew: Yes, but you ignored the point of my post. If we run a $500 billion managed trade deficit, we must sell assets to cover the imports. There is no free lunch.

      Housing is one and favored asset for foreign investment. But the supply is artificially constrained, through a powerful property-owning class. That sets up nicely for property appreciation.

      Of course, more immigrants, but a fixed housing stock incurs the same result.

      You seem to want to evade the issue of property zoning. It is the issue no one wants to talk about, as it comes down to telling people to end property zoning. So in establishment circles, and in left-wing Bay Area circles, everyone agrees that property zoning needs “reform,” maybe someday and quickly changes the topic.

      But housing is such a large part of household outlays, and so important to business location decisions, that it should not be ignored. There is also the issue of property rights, and should not a property owner decide if he wants condos or not on his land.

      Just come out and say it: “Due to the global imperatives of free trade, immigration and free enterprise, your neighborhood is no longer zoned. Please step aside for the bulldozers!”

      If you think some regulations are good (property zoning) and some are bad (minimum wages), then who decides which regulations are good or bad?

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      • Benjamin, we do not have to sell assets to cover imports. We give those who sell foreign goods to US citizens money that the foreign citizen may use to buy goods or invest as he or she chooses. There is no free lunch. But, you limit the options to create unnecessary concern about an issue.

        It is left wing Bay Area circles who love property zoning. It is how they limit supply in order to keep housing prices high. The powerful property-owning class that you are talking about is very left wing and loves to use the power of government to get what they want.

        If you want condominiums on your land, it should be your decision. Since most business people are rational, they will evaluate the proposal to see if condominiums would pass the profit and loss test before investing money in such a venture. If consumers would patronize such a venture and willingly pay hard earned dollars to cause the project to earn profits, then the property owner should be able to create condominiums on his land.

        A lot of laws and regulations are bad. In a voluntary cooperative environment, you concerns about needing regulations to protect are invalid.

        Liked by 1 person

  4. Greg

    Would land use restrictions in the form of homeowner association CC&Rs agreed to by the individual landowners themselves be OK?

    They could agree among themselves to not sell to condo developers, or pig farmers, or whatever.

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    • Ron H., it depends on the HOA’s restrictions. Some restrictions could be unreasonable restraints on property owners. One example of such unreasonable restraints include limiting who the owner can sell to on based on race.

      The biggest problem to a single homeowner building a high-rise condominium building is that his or her property is not big enough to support such a structure. Also, it is very difficult to get financing for such a project unless it looks economically viable given the available supply for such property in that area relative to likely demand of consumers. I doubt seriously that a single homeowner could convince financiers that demand would be sufficient (much less his property being big enough to allow for the development) to make the project a likely economic success.

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      • Greg

        Some restrictions could be unreasonable restraints on property owners. One example of such unreasonable restraints include limiting who the owner can sell to on based on race.

        Why is that unreasonable? Keep in mind that HOA agreements are initially signed by every new homeowner as a condition of the sale, so the agreement is unanimous. The owner in question has already agreed to the hypothetical restriction.

        Yes, I understand such a restriction is unlawful, but that’s not the point.

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        • Ron said, “Why is that unreasonable? Keep in mind that HOA agreements are initially signed by every new homeowner as a condition of the sale, so the agreement is unanimous. The owner in question has already agreed to the hypothetical restriction. Yes, I understand such a restriction is unlawful, but that’s not the point.”

          The word “unreasonable” is defined as:

          1. Being beyond what can be accepted,
          2. Clearly inappropriate, excessive, or harmful in degree or kind, and
          3. Lacking justification in fact or circumstance.

          Therefore, what is “unreasonable” involves subjectivity, usually because multiple interests must be considered.

          The goal is freedom. An individual has the natural right to sell his or her property without unreasonable restraint by others. This freedom also involves the natural right to enter into contractual agreements with others, like the HOA contract that you mentioned. Now, if the HOA agreement prohibits a homeowner from selling his or her property to a buyer just because of his or her race, then we have to look at the justification for such restriction on race. Such a restriction does not impinge on the value of the home or the value of other peoples’ homes in the neighborhood. I cannot think of a good justification for a HOA restriction based on race, thus such a restriction is unreasonable according to the definition.

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          • Greg

            The word “unreasonable” is defined as:

            1. Being beyond what can be accepted,
            2. Clearly inappropriate, excessive, or harmful in degree or kind, and
            3. Lacking justification in fact or circumstance.

            Obviously none of those conditions are met in the context of a voluntary agreement, so such a unanimously agreed restriction isn’t “unreasonable”. Hopefully we agree that no one is forced to buy a house and sign an agreement they find “unreasonable”.

            Therefore, what is “unreasonable” involves subjectivity, usually because multiple interests must be considered.

            Yes. The multiple interests in this case are are those of the parties to the agreement. Others have no legitimate claim to the private property of the owners.

            As a private property owner I may refuse to allow anyone under 5′ tall to enter my home. I may have an agreement with all my neighbors to never allow anyone under 5′ tall into our houses or to sell to anyone under 5′ tall. This agreement was a condition of our original purchase of the property. No one’s rights are violated by this agreement, as no one has any rights with regard to private property to enter or buy a private property without the consent of the owner. And in this hypothetical scenario my neighbors and I agree that we don’t want short people to live in the neighborhood.

            Other CC&Rs to which I’ve voluntarily agreed may include limits on paint colors, parking inoperative cars on the lawn, limits on short term rentals (AirBnB) or any number of other conditions that my neighbors and I agreed would help enhance our enjoyment of our properties.

            The goal is freedom.

            The default condition is freedom.

            An individual has the natural right to sell his or her property without unreasonable restraint by others.

            That’s correct. The term “unreasonable” being subjective, as you pointed out.

            This freedom also involves the natural right to enter into contractual agreements with others, like the HOA contract that you mentioned.

            That’s also correct.

            Now, if the HOA agreement prohibits a homeowner from selling his or her property to a buyer just because of his or her race, then we have to look at the justification for such restriction on race.

            No, “we” don’t need to do anything. Private property owners need not justify their actions to us, who have no legitimate interest. Please don’t conflate “legal” with “legitimate”. Legal just means some 3rd parties have decided to place arbitrary limits on our actions, backed by threats of force.

            And of course the owners involved voluntarily agreed to the specific restriction, as their right.

            I cannot think of a good justification for a HOA restriction based on race …

            Nor can I, nor can I think of a justification based on height, but that doesn’t mean we can restrict the choices of others.

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          • Ron said, “Obviously none of those conditions are met in the context of a voluntary agreement . . .”

            Sure they do. In particular, it is unreasonable to include a race restriction on my right to sell my property to whom I wish at some future date. It is “unreasonable” for you to insist on a restriction like race that has no justification in fact or circumstance. The owner wants to sell a house, and I want to buy a house. The HOA has a justification for restrictions as to things I might do to lower the value of the other homes in the neighborhood, but the HOA has no justification in limiting the pool of potential buyers by restricting my right to sell to whom I choose based on race.

            “The multiple interests in this case are are those of the parties to the agreement. Others have no legitimate claim to the private property of the owners.”

            Yep. And, the HOA has no right to restrict to whom I can sell the home at some future date.

            “As a private property owner I may refuse to allow anyone under 5′ tall to enter my home. I may have an agreement with all my neighbors to never allow anyone under 5′ tall into our houses or to sell to anyone under 5′ tall. This agreement was a condition of our original purchase of the property. No one’s rights are violated by this agreement, as no one has any rights with regard to private property to enter or buy a private property without the consent of the owner. And in this hypothetical scenario my neighbors and I agree that we don’t want short people to live in the neighborhood.”

            You have the right to do that for your own property. But, you have no right to unreasonably restrict my freedom to whom I let on my property or to whom I choose to sell my property to at a future date. What is important is the rights of the individual, not the rights of some collective of homeowners. The only time that collective gets a say is when they can justify their restriction based on how it might affect the value of their properties.

            “Other CC&Rs to which I’ve voluntarily agreed may include limits on paint colors, parking inoperative cars on the lawn, limits on short term rentals (AirBnB) or any number of other conditions that my neighbors and I agreed would help enhance our enjoyment of our properties.”

            Yep. And, all those may be justified based on the likely loss in value of other homes if you choose to paint your home a crazy color, leave inoperative cars on the lawn, convert your home to a rental business, etc. However, there is no justification based on home value for restricting my right to sell my home to whom I choose based on race or height.

            “The default condition is freedom.”

            No. The goal is freedom. Your right, through government or contracts, ends where my natural rights begin. For additional consideration, I might choose to give up some additional rights, but the price for the home does not cover it.

            “The term “unreasonable” being subjective, as you pointed out.”

            Most things are subjective, especially when we are discussing an issue involving a conflict of rights.

            “No, ‘we’ don’t need to do anything. Private property owners need not justify their actions to us, who have no legitimate interest.”

            “We” as in parties to the agreement. I, as a property owner, do not need to put up with restrictions that are not justifiable, especially since the seller did not provide me with any additional consideration for my giving up any additional rights.

            “Please don’t conflate ‘legal’ with ‘legitimate.’ Legal just means some 3rd parties have decided to place arbitrary limits on our actions, backed by threats of force.”

            You must be dealing with too many “progressives.” Laws (not ones written by idiot “progressives”) are legitimate and do not impose arbitrary limits on the natural rights of individuals.

            “And of course the owners involved voluntarily agreed to the specific restriction, as their right.”

            Where they have justification, then yes. Or where they have provided additional consideration to the individual for giving up his rights. With the home owner example, the price of the house just compensates the seller for the home his or she is selling. It does not include additional compensation to the buyer for giving up, without justification, additional rights like restricting to whom he or she can sell the home to in the future.

            “Nor can I, nor can I think of a justification based on height, but that doesn’t mean we can restrict the choices of others.”

            Exactly! That is why a collective of homeowners cannot put restrictions on my natural rights to do with my property as I wish without justification or additional compensation.

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          • Greg

            Just so there’s no misinterpretation, let me make it clear that I’m talking about HOA restrictions agreed to by all buyers when they purchase the property. It is not legitimate for a HOA to impose new restrictions on existing owners unless all owners agree to the change.

            So, if I buy a house and agree as part of the purchase agreement that I will not later sell to someone of a different race or who is short, I should expect to honer that agreement. If there are no such restrictions in my purchase agreement And if I haven’t agreed to abide by changes others impose later without my consent, I will expect to sell to whomever I chose.

            Yep. And, the HOA has no right to restrict to whom I can sell the home at some future date.

            If you previously agreed to that restriction as part of your purchase contract, then yes, the other owners who are parties to the agreement CAN hold you to your agreement, and you may NOT sell to whomever you please. Don’t you believe contracts should be enforced?

            “We” as in parties to the agreement.

            We as parties to the agreement are obligated to honor agreements we made as a condition of acquiring the property.

            I, as a property owner, do not need to put up with restrictions that are not justifiable, especially since the seller did not provide me with any additional consideration for my giving up any additional rights.

            You, as a property owner, are obligated to honor conditions and restrictions you accepted when you bought the property. You haven’t given up any rights because you don’t HAVE any rights to that property until you agree to buy it from the previous owner, at which time you gain the rights and restrictions granted by the previous owner. If you don’t like the restrictions, don’t offer to buy the property.

            Where they [parties to the HOA] have justification, then yes.

            What does that even mean? The owner of private property need not justify any condition or restriction on the sale of their property. They have agreed to whatever restrictions when they acquired the property, and you the potential buyer, either agrees to the restrictions, or you don’t buy the property. Are you unfamiliar with the concept of freedom of contract?

            That is why a collective of homeowners cannot put restrictions on my natural rights to do with my property as I wish without justification or additional compensation.

            Not after you are the property owner, no – unless you agreed that changes to the rules can be made by majority vote or something dumb like that. But if you agreed to a restriction when you bought, then you are obligated to honer your agreement.

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          • Ron,

            We disagree on several issues as noted below:

            1. The crux of your argument relies on a legal concept known as a contract. Yet, you argue incorrectly that the law is not legitimate and should not be followed.

            2. To have a valid contract, there must be consideration given by all parties to the contract.

            3. In selling a home, the consideration given up by the seller is the home and the consideration given up by the buyer is cash.

            4. There are only two parties to the contract: (1) the homeowner as the seller and (2) the home buyer. Please notice that the HOA is not a party to the contract.

            5. The seller can impose restrictions on the buyer, without additional consideration, as long as the restrictions are reasonable and are directly related to home ownership (i.e., maintaining or improving the value of the home).

            6. A restriction on who the buyer can later sell the home to based on race or height, or a restriction on who the buyer can have on his or her property based on height has nothing to do with improving the value of the home, and thus, have no justification.

            7. Such restrictions also limit potential demand for the home by limiting the number of potential buyers. When demand is limited, the future sales value is diminished. This is a substantive impairment of the new home owner’s rights and property value. And, that requires additional consideration.

            8. The seller could take a reduction in the sales price of his or her home to provide the consideration necessary to cause the home buyer to give up a substantive right and the likely loss of value resulting from the restriction reducing future demand for the home. But, that is unlikely to happen.

            9. The HOA (though not a party to the home sale agreement) could enter into a separate agreement with the new home owner to get him or her to give up a substantive right and likely loss of value resulting from this restriction reducing future demand for the home. But, that is also unlikely as some of the other home owners are likely to object with the argument that the HOA is violating its purpose for being with is to improve the value of homes in the neighborhood.

            10. The goal is freedom. And, you limit freedom when non-parties to the a home purchase can impose substantive restrictions on potential home buyers without either justification or consideration.

            “. . . let me make it clear that I’m talking about HOA restrictions agreed to by all buyers when they purchase the property. It is not legitimate for a HOA to impose new restrictions on existing owners unless all owners agree to the change.”

            No. The HOA is not a party to the home sale agreement because it does not own the home. The home seller may do as if the restrictions are justifiable (i.e, they improve the value of the home and neighborhood) or involve additional consideration up and above the selling price of the home.

            “So, if I buy a house and agree as part of the purchase agreement that I will not later sell to someone of a different race or who is short, I should expect to honer (sic) that agreement.”

            Not without additional consideration being transferred from the seller to the buyer for giving up a substantive right.

            “Don’t you believe contracts should be enforced?”

            Contracts should be enforced if it is valid contract where the seller has paid consideration for substantive rights given up by the buyer.

            “We as parties to the agreement…”

            The HOA is not a party to the agreement. And, the seller must give consideration to the buyer for every substantive right given up by the buyer.

            “You, as a property owner, are obligated to honor conditions and restrictions you accepted when you bought the property.”

            Not if the buyer has been fully compensated for the substantive rights given up, especially where those restrictions might reduce future demand for the home and thus its future selling price.

            “’Where they [parties to the HOA] have justification, then yes.’ What does that even mean?”

            Justification means that the restrictions are reasonably designed to improve the value of the home and neighborhood.

            The owner of private property need not justify any condition or restriction on the sale of their property. They have agreed to whatever restrictions when they acquired the property, and you the potential buyer, either agrees to the restrictions, or you don’t buy the property. Are you unfamiliar with the concept of freedom of contract?

            “That is why a collective of homeowners cannot put restrictions on my natural rights to do with my property as I wish without justification or additional compensation.”

            Not after you are the property owner, no – unless you agreed that changes to the rules can be made by majority vote or something dumb like that. But if you agreed to a restriction when you bought, then you are obligated to honer your agreement.

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          • Ron also said, “The owner of private property need not justify any condition or restriction on the sale of their property.”

            The seller has to pay for any and all substantive rights given up the by buyer, otherwise there is no contract. If the restriction is justified as improving the value of the home, then it is justifiable. If it requires the home buyer to give up substantive rights, then the seller must pay additional compensation to the home buyer.

            “They have agreed to whatever restrictions when they acquired the property, and you the potential buyer, either agrees to the restrictions, or you don’t buy the property.”

            The seller did not pay the additional compensation required for the buyer to forfeit a substantive right that is also likely to negatively impact the future sales value of the home. Thus, a proper contract was not agreed to.

            “Are you unfamiliar with the concept of freedom of contract?”

            This type of disparaging comment is beneath you. I find it funny because you are arguing that a collective (that is not a party to the home sale contract) can impose a substantive restriction on the home buyer that will reduce future demand for the home and likely reduce future sales value without compensation.

            “But if you agreed to a restriction when you bought, then you are obligated to honer (sic) your agreement.”

            The home seller or the HOA have to pay the home buyer for substantive restrictions on his or her rights especially if those restrictions are not justifiable because they limit future demand for the home and thus reduce its likely future sales price.

            The home sales agreement concerns the sales of the home for cash. Restrictions included that improve the value of the home are justifiable. Restrictions that limit substantive rights that likely reduce future sales value are not justifiable and are not permitted unless additional compensation is made to the home buyer up and above the amount paid for the home.

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          • Ron, I have one additional point. The HOA is simply a neighborhood governing body where the officials are elected by the home owners. You seem to be arguing that government may use its power to take the property value of new home owners without justification or compensation. That is the argument of bigger government advocates. As the founders noted, government is a necessary evil . . . as long as its actions are limited to those that: (1) are justifiable (limited to improving natural rights of citizens without unduly burdensome costs) and (2) do not take substantive rights without just compensation.

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          • Greg

            Property rights are not all or nothing. It is possible to transfer some rights to property without transferring all property rights. It is impossible for a seller to transfer property rights to buyer that the seller doesn’t have to begin with. It is possible for a restriction or condition to exist on a particular piece of property because of previous agreements (contracts) regarding the use or disposition of the property, and those restrictions and conditions may be imposed on a subsequent buyer by including them in the sales contract. By accepting these conditions and restrictions through completing a transfer of property rights as in a sale, the new owner has committed themselves to honoring the entirety of the contract including CC&Rs.

            Consideration may take any form and is not limited to money. I may “sell” (transfer my property rights in) my home to my grandson for $0.00 on the condition that he never sell the property, but instead transfer it to his own grandson or some other family member. By accepting the property – including the condition – he is obligated to follow my wishes and never sell the property.

            Similarly, if I have purchased my property with existing restrictions, e.g. without mineral or water rights and perhaps with preexisting easements of one form or another (maybe.preexisting airport noise), I cannot transfer water or mineral rights to the buyer nor can I sell them the right to peace and quiet, free from airport noise, because I don’t have those rights to transfer. Similarly if my property doesn’t include the right to sell to people of other races, or to short people, or to a pig farmer for a pig farm, or to a shopping mall, I can’t transfer those rights to a new buyer because I don’t have them to transfer. If I hadn’t previously agreed to those conditions I wouldn’t have bought the property.

            Those missing property rights don’t magically reappear when the property is transferred to a new owner. So no, you CAN’T sell to whomever you wish if you have previously agreed not to do so when you bought the property.

            Yes, most CC&Rs are intended to maintain property values and desirable living conditions for current residents. Some people would argue that not selling to people of other races or to short people is one way to help ensure that happens. Your repeated reference to ‘additional consideration’ is irrelevant. It’s possible the restrictions I’ve used as examples would make a property MORE valuable in the eyes of a potential buyer. You are projecting your own values into these examples with subjective terms like “unreasonable”, “valuable”, and “additional consideration”. What is “reasonable or “valuable” is determined by the buyer and the seller, not by you or me.

            Are you trying to say “discrimination against others is wrong” without actually explaining why that would be true?

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          • Greg

            You seem to be arguing that government may use its power to take the property value of new home owners without justification or compensation.

            Wow! Where did you get that impression? Please quote something I’ve written to that effect.

            My actual position on that is that there is NO justification possible, and that government has NO legitimate authority to take private property FOR ANY REASON! Period.

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          • Ron said, “It is possible for a restriction or condition to exist on a particular piece of property because of previous agreements (contracts) regarding the use or disposition of the property, and those restrictions and conditions may be imposed on a subsequent buyer by including them in the sales contract.”

            False. Under existing contract law, a party has to pay the other party for any restrictions on his or her substantive rights regarding the property to be purchased, especially where such restricts the future potential buyers and thus impacting the price. Sellers want to sell their property for the market price and not market price less the cost for imposing a substantive restriction on the new owner. These types of restrictions have been tried many times and all have failed because they are unreasonable restraints on trade.

            “By accepting these conditions and restrictions through completing a transfer of property rights as in a sale, the new owner has committed themselves to honoring the entirety of the contract including CC&Rs.”

            No. The new owner commits to complying with those restrictions that justifiably are designed to improve the value of the new owner’s home by improving the value of all homes in the neighborhood. The seller must pay additional compensation in the form of cash or some other thing of value for the forfeiture of any substantive rights.

            “Consideration may take any form and is not limited to money.”

            Yep, but it has to be a thing of value designed to compensate the party for the value of the substantive right being forfeit. The seller, or for that matter the HOA, can’t get a free lunch.

            “I may “sell” (transfer my property rights in) my home to my grandson for $0.00 on the condition that he never sell the property, but instead transfer it to his own grandson or some other family member. By accepting the property – including the condition – he is obligated to follow my wishes and never sell the property.”

            Yep. Your grandson agreed to the forfeiture of a substantive right (to sell the home to whom he chooses) for the consideration from you of a home at no cost.

            “Similarly, if I have purchased my property with existing restrictions, e.g. without mineral or water rights and perhaps with preexisting easements of one form or another (maybe.preexisting airport noise), I cannot transfer water or mineral rights to the buyer nor can I sell them the right to peace and quiet, free from airport noise, because I don’t have those rights to transfer.”

            Yep. And, you negotiated the sale of property that does not contain mineral or water rights, or a nuisance for noise from the airport. All those are factors considered in negotiating the sales price. Water rights are a big deal. If you are selling a home on a lake, but it does not have rights to that water while all the other lake front properties do, then your home will sell for way less than the other homes. Same for mineral rights. And, homes close to the airport or with other noise problems are less desirable and sell for way less than other homes that do not have that issue.

            “Similarly if my property doesn’t include the right to sell to people of other races, or to short people, or to a pig farmer for a pig farm, or to a shopping mall, I can’t transfer those rights to a new buyer because I don’t have them to transfer. If I hadn’t previously agreed to those conditions I wouldn’t have bought the property.”

            Yet, those types of substantive restrictions are not factored into the market prices of homes bought and sold in most neighborhoods. Thus, if you want to impose that on a new buyer, and have a chance at getting it enforced in a court, you have to pay additional consideration for the forfeiture of a substantive right.

            “Those missing property rights don’t magically reappear when the property is transferred to a new owner. So no, you CAN’T sell to whomever you wish if you have previously agreed not to do so when you bought the property.”

            Property rights were never missing. You were not bound by substantive restrictions on your right to sell the property to whom you choose even if they were in the deed. And, you know this because you won’t take less than market value for your home if you tried to sell it and you won’t pay additional consideration for the new owner to forfeit a substantive right. And, very importantly, are you really going to sue the new owner after you move and he fails to comply with your restriction. No. You don’t live there anymore, and the HOA is not a party to the agreement.

            “Yes, most CC&Rs are intended to maintain property values and desirable living conditions for current residents.”

            And, that is why they are not unreasonable restraints on trade . . . as long as they are not unduly expensive. For example, these conditions cannot require that you repaint your home every month. It might improve the value of your property, but is too expensive to be anything but an unreasonable restraint on trade.

            “Some people would argue that not selling to people of other races or to short people is one way to help ensure that happens.”

            No. Economics teaches us that limiting the number of potential buyers limits demand and is likely to cause the price to be less than it otherwise would have had competition to buy the home been unrestricted. Yes, I know that bad people make disingenuous arguments. They are made mostly by people advocating for government decisions and power benefiting the collective at the expense of the individual’s substantive rights.

            “Your repeated reference to ‘additional consideration’ is irrelevant.”

            That is not an argument. It is just a false conclusory statement. A party to a contract must pay additional consideration to get the other party to forfeit a substantive right.

            “It’s possible the restrictions I’ve used as examples would make a property MORE valuable in the eyes of a potential buyer.”

            Only if the potential buyer does not understand economics and the principles regarding supply and demand.

            “You are projecting your own values into these examples with subjective terms like ‘unreasonable,’ ‘valuable,’ and ‘additional consideration.'”

            No. I am a lawyer. I tend to use legal terms like “unreasonable,” “valuable,” and “additional consideration” when discussing contract law.

            “What is “reasonable or “valuable” is determined by the buyer and the seller, not by you or me.”

            Yep. However, we do not allow a governing body like an HOA to use its limited power to impose substantive restrictions that sellers do not want to pay for nor take the time and expense to enforce after the sale. And, we do not allow a governing body like an HOA to use its limited power to require a buyer to accept substantive restrictions on his or her rights without just compensation.

            “Are you trying to say ‘discrimination against others is wrong’ without actually explaining why that would be true?”

            No. Discrimination occurs everyday. Discrimination is, however, often foolish because it interferes with markets. Left to themselves, individuals are unlikely to discriminate because it interferes with their ability to realize the true market value of their property. With the introduction of government power, people are much more likely to discriminate simply because they can use that government force to pass the unjustifiable cost off onto others without having to pay just compensation.

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          • Ron said, “My actual position on that is that there is NO justification possible, and that government has NO legitimate authority to take private property FOR ANY REASON! Period.”

            If that is your position, then you oppose governing bodies such as HOAs from imposing restrictions on the substantive rights of home owners from selling their homes to whom they wish without just compensation. Your argument up till now has been that the HOA could impose restrictions on the substantive rights of homeowners without just compensation.

            Like

          • Greg

            False. Under existing contract law, a party has to pay the other party for any restrictions on his or her substantive rights regarding the property to be purchased …

            You have posted this at least twice before in response to my comments, even though it misses the point. Do you really not understand my comments or are you being deliberately obtuse?

            These types of restrictions have been tried many times and all have failed because they are unreasonable restraints on trade.

            Oh my. Please provide a reference for that statement. You won’t be insulted if I don’t believe you, will you? Is my transfer of my home to my grandson an unreasonable restraint on trade? You must be thinking of some circumstances other than individuals disposing of their own personal private property.

            In this case I would be restraining my own trade. Not sure it’s illegal to harm my own ability to maximize my gain from a sale, And as I’ve written and you keep ignoring, some restrictions are actually desirable to some buyers, and the property value is enhanced by them,

            Please don’t say it’s OK because Grandson agreed to it – that’s my entire point. Please refrain from making my argument as well as your own. It’s making me dizzy.

            Yep. And, you negotiated the sale of property that does not contain mineral or water rights, or a nuisance for noise from the airport.

            … and does not contain the right to sell to people of other races, or to short people.

            You keep using the word “justified”. Justified to whom?

            No. The new owner commits to complying with those restrictions that justifiably are designed to improve the value of the new owner’s home by improving the value of all homes in the neighborhood.

            Such as restrictions on sales to short people.

            At this point you seem to be arguing against your own previous arguments. I’m not sure how to proceed.

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          • Ron said, “You have posted this at least twice before in response to my comments, even though it misses the point. Do you really not understand my comments or are you being deliberately obtuse?”

            No. I have posted in many more times that just twice. I do so because you keep saying the same incorrect things. To have a valid contract, a party has to pay the other party for any restrictions on his or her substantive rights regarding the property to be purchased. There is no consideration if the buyer is paying the market value of the home. If the seller wishes to request the buyer forfeit a substantive right, then the seller has to pay the buyer for that forfeiture. Your comments do not change contract law or the basics of economics. Then, you resort to a disparaging comment, which indicates that you know you are wrong, and have to resort to a personal attack instead of dazzling us with a brilliant argument.

            “These types of restrictions have been tried many times and all have failed because they are unreasonable restraints on trade.”

            Ron responded with “‘Oh my. Please provide a reference for that statement” to my statement that ‘these types of restrictions have been tried many times and all have failed because they are unreasonable restraints on trade.'”

            See, Shelley v. Kraemer, 334 US 1 (1948).

            “You won’t be insulted if I don’t believe you, will you?”

            No. You have already made insulting comments. I no longer expect to educate you as to the law. You can bring education to the ignorant, but you cannot make them learn.

            “Is my transfer of my home to my grandson an unreasonable restraint on trade?”

            No. As explained earlier, your giving him the home is just compensation for the forfeiture of a substantive right to sell the home to whom he chooses.

            “You must be thinking of some circumstances other than individuals disposing of their own personal private property.”

            No. And, I have explained this many times already. A governing body such as an HOA cannot enforce restrictions to an agreement it is not a party to, especially where it has not paid just compensation to the home buyer forfeiting a substantial right.

            “In this case I would be restraining my own trade. Not sure it’s illegal to harm my own ability to maximize my gain from a sale.”

            No. You are compensating your grandson for his forfeiture of a substantive right by giving the home to him for free.

            “And as I’ve written and you keep ignoring, some restrictions are actually desirable to some buyers, and the property value is enhanced by them.”

            Nope. Some do. They are justifiably related to improving the home’s value without imposing an excessive cost. Otters do not, like limiting potential buyers and thus demand and like the future sales price. To get that one, the seller or the HOA has to pay the buyer just compensation.

            “Please don’t say it’s OK because Grandson agreed to it – that’s my entire point. Please refrain from making my argument as well as your own. It’s making me dizzy.”

            No. I did not say that. I said, “You are compensating your grandson for his forfeiture of a substantive right by giving the home to him for free.”

            “… and does not contain the right to sell to people of other races, or to short people.”

            Nope. There is no sales data of home sold with such restrictions. There is, however, sales data of homes sold without mineral or water rights. Or, for that matter, were located close to airports. The relevant sales data reflects lower prices for homes sold without mineral or water rights, or that were located close to airports.

            “You keep using the word “justified”. Justified to whom?”

            To everyone but the governing authority known as the HOA.

            “Such as restrictions on sales to short people.”

            No. There is no sales data reflecting drops in home value from sales to short people.

            “At this point you seem to be arguing against your own previous arguments. I’m not sure how to proceed.”

            No. My argument has been consistent, logical, and in compliance with existing law. You arguments, as you confessed, are dizzy.

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          • If that is your position, then you oppose governing bodies such as HOAs from imposing restrictions on the substantive rights of home owners …

            I’m sorry, I thought you understood the difference between governance that is freely and unanimously chosen by a group of people with common interests who freely and voluntarily join a community – such as an association of homeowners – and who may voluntarily choose to govern themselves in any manner they choose on the one hand, and governance imposed on people against their will under threat of force by a small group of people who claim authority on the other hand.

            What kind of lawyer are you again?

            Please refresh yourself on the concept of “consent”. It’s very important.

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          • LOL! Your funny. Shelley v. Kraemer is a racial discrimination case, and has nothing to do with restraint of trade. Please keep your stories straight. . I initially agreed that racial discrimination was illegal, but asked you to ignore that for the moment because our discussion was about freedom of contract.

            You are plainly confused on this topic, and it’s not clear why you waste your time commenting at econ and libertarian blogs on subjects about which it is painfully obvious you have little understanding.

            What IS clear, is that you won’t waste any more of MY time. I’m done with you.

            Like

          • Ron said, “I’m sorry, I thought you understood the difference between governance that is freely and unanimously chosen by a group of people with common interests who freely and voluntarily join a community – such as an association of homeowners – and who may voluntarily choose to govern themselves in any manner they choose . . . ”

            That is exactly what the progressives say.

            “What kind of lawyer are you again?”

            Ah, that is exactly the same type of personal attack that progressive make when they know they are wrong and losing an argument.

            “Please refresh yourself on the concept of “consent”. It’s very important.”

            Please refresh yourself on the concepts of “natural rights” and “limitations on governmental power.” They are very important.

            Like

          • Ron said, “LOL!”

            Ah, the “LOL!” tell of cognitive dissonance.

            “Your funny.”

            No. It is “you are” not “your.” Perhaps you ought to spend some time learning English grammar.

            “Shelley v. Kraemer is a racial discrimination case, and has nothing to do with restraint of trade.”

            Read the case. The court had to address the racial discrimination issue because the appellants brought that issue up. But, if you read the case carefully, the court notes that all these types of restrictions on substantive rights are unreasonable restraints on trade.

            “Please keep your stories straight.”

            My story and arguments are straight and logical. There are no restrictions on race or height that are legally enforceable in the real estate transfers in the US. You said there were. Perhaps you ought to provide some support for your view.

            “I initially agreed that racial discrimination was illegal, but asked you to ignore that for the moment because our discussion was about freedom of contract.”

            I ignored it. You asked for proof that they were not enforced in the US. And, I provide that. The issue is freedom of contract. And, a governing body like an HOA may not impose restrictions on the substantive rights of parties to a real estate contract without just compensation to the party forfeiting that substantive right.

            “You are plainly confused on this topic . . . ”

            Ah, another personal attack. Do you have a logical argument supported by evidence as to why a governing body like an HOA should be able to impose height and race restrictions in a real estate transfer agreement the HOA is not a party to?

            “and it’s not clear why you waste your time commenting at econ and libertarian blogs on subjects about which it is painfully obvious you have little understanding.”

            Ah, another personal attack “tell” of cognitive dissonance. Do you realize how much you sound like a bigger government advocate?

            “What IS clear, is that you won’t waste any more of MY time. I’m done with you.”

            Ah, the “pigeon” response! It is the common response of a progressive who has lost an argument on the merits.

            Why do you pretend that you are an anarcho-capitalist when you advocate that a governing body like an HOA ought to be able to use its power to interfere in the rights of individuals to freely contract in the sale of a home?

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          • Ron H said, “Thanks for the tip. I did read it, and we can now add ‘liar’ to your profile.”

            Read it again. You are either unable to comprehend or you are lying. My guess is both. After all, you lie about being an anarchy-capitalist when you are just another bigger government advocate.

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          • Ron H, your name calling is just another “tell” of your cognitive dissonance.

            How about getting back to the issue: “Why do you pretend that you are an anarcho-capitalist when you advocate that a governing body like an HOA ought to be able to use its power to interfere in the rights of individuals to freely contract in the sale of a home?”

            Hmmmm?

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          • Greg

            And there’s this:

            The seller did not pay the additional compensation required for the buyer to forfeit a substantive right that is also likely to negatively impact the future sales value of the home. Thus, a proper contract was not agreed to.

            First, the buyer has no rights to give up until they actually own the rights to the property in question, and that won’t occur unless and until they agree to the conditions and restrictions imposed by the seller. You are assuming that restrictions and conditions lower the value of the property, but in many cases it’s just the opposite. People choose to live in neighborhoods where people have values and lifestyles similar to their own. Some restrictions are desirable for that reason. It would be devastating to neighborhood harmony and bliss if families of short people started moving in.

            Then, you are suggesting here that you can determine for other people what is and isn’t a “proper” contract, which prompted me to ask whether you are familiar with the concept of freedom of contract.

            People should be free to enter into any agreement they like, and the only things you and I can ask of that contract is that it be freely and voluntarily entered into by all parties, and that there is no fraud involved.

            Coercion, duress, and fraud are pretty much universally condemned, and reasons to void a contract. Other than that, 3rd parties such as you and I have no standing to determine for others what is or isn’t a “proper” contract.

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          • Ron said, “First, the buyer has no rights to give up until they actually own the rights to the property in question, and that won’t occur unless and until they agree to the conditions and restrictions imposed by the seller.”

            Nope. The seller is asking two things in his or her negotiations. First, the seller is asking the buyer to purchase the property for a certain price to be paid in cash or other valuable consideration. Second, the seller is asking the buyer to give up a substantive right to sell the property at a later day to whom he or she chooses. The seller has to pay for the buyer for the buyer to forfeit a substantive right. Thus, the second part of the contract fails for lack of consideration. The courts will enforce the other part of the contract because the seller gave the buyer good and valuable consideration in the form of the home and the buyer gave the seller good and valuable consideration in the form of cash. And, the seller is now gone and unlike to go to the time and expense of paying to try to enforce an unenforceable contract. Even if the seller wanted to, he would not do it because that part of the contract fails for lack of consideration.

            “You are assuming that restrictions and conditions lower the value of the property, but in many cases it’s just the opposite.”

            Limiting the supply of potential buyers lowers demand, and when demand is lowered relative to supply, prices fall. That is just basic economics.

            “People choose to live in neighborhoods where people have values and lifestyles similar to their own.”

            No. People choose to live in safe neighborhoods convenient to work, schools, shopping, etc. No one wants to live in a slum, and none choose to if they can afford to buy somewhere else.

            “Some restrictions are desirable for that reason. It would be devastating to neighborhood harmony and bliss if families of short people started moving in.”

            Nope. And, it is certainly not desirable to the seller since fewer buyers mean lower demand and likely lower bidding prices. Again, that is just basic economics.

            “Then, you are suggesting here that you can determine for other people what is and isn’t a “proper” contract, which prompted me to ask whether you are familiar with the concept of freedom of contract.”

            No. I am a lawyer who is paid valuable consideration by many clients to make sure they are not cheated by others who would cheat them by making disingenuous arguments. I would never let any client forfeit a substantive right without additional consideration in excess of the market value of the real property to be purchased.

            “People should be free to enter into any agreement they like, and the only things you and I can ask of that contract is that it be freely and voluntarily entered into by all parties, and that there is no fraud involved.”

            Yet, your example involves a non-party (a governing body known as an HOA) that seeks to impose substantive restrictions on a seller who is not willing to accept less than market price for his or her property nor willing to compensate the seller for forfeiting a substantive right. In addition, such a seller is not likely to take the time and expense to enforce such a substantive restriction after the sale. Take government out of this transaction and this issue disappears completely.

            “Coercion, duress, and fraud are pretty much universally condemned, and reasons to void a contract. Other than that, 3rd parties such as you and I have no standing to determine for others what is or isn’t a “proper” contract.”

            The only element of coercion and fraud in the proposed contract occurs when the HOA, a governing body, seeks to impose substantive restrictions on sellers who do not want to pay for them and on buyers who are not compensated for their forfeiture of a substantive right.

            Like

          • Greg

            \”First, the seller is asking the buyer to purchase the property for a certain price to be paid in cash or other valuable consideration. Second, the seller is asking the buyer to give up a substantive right to sell the property at a later day to whom he or she chooses. The seller has to pay for the buyer for the buyer to forfeit a substantive right. Thus, the second part of the contract fails for lack of consideration.

            You have failed to establish that consideration for the so-called second part wasn’t included in the agreed price. Unless you are willing to claim that there is some dollar amount or specific form that consideration must take, and that it must be listed separately your argument fails. Obviously any restrictions and easements or liens must be listed.

            How would a sales contract look for a property without mineral or water rights How many parts would it have and how would consideration be determined for those two missing property rights? BTW most real property these days that isn’t strictly rural doesn’t include mineral or water rights. If you own a home built in the last 50 years it’s doubtful you own the water underneath it and you may not drill for it. Someone else owns it. Perhaps your local water company. Please use your own argument in your response, and don’t use mine.

            Didn’t you say you’re a lawyer? What type of law do you practice, if I may ask. You seem to be lacking some important basics regarding property rights.

            And, the seller is now gone and unlike to go to the time and expense of paying to try to enforce an unenforceable contract.

            Don’t worry, the neighbors will sue to enforce the contract. They and the previously mentioned seller all agreed to not let short people move into their neighborhood, as did the recent buyer.

            Me: “You are assuming that restrictions and conditions lower the value of the property, but in many cases it’s just the opposite.”

            You: “Limiting the supply of potential buyers lowers demand, and when demand is lowered relative to supply, prices fall. That is just basic economics.”

            You are not paying attention.

            No. People choose to live in safe neighborhoods convenient to work, schools, shopping, etc.

            That’s what I said. Please make up your own arguments.

            “Some restrictions are desirable for that reason. It would be devastating to neighborhood harmony and bliss if families of short people started moving in.”

            Nope. And, it is certainly not desirable to the seller since fewer buyers mean lower demand and likely lower bidding prices. Again, that is just basic economics.

            “Then, you are suggesting here that you can determine for other people what is and isn’t a “proper” contract, which prompted me to ask whether you are familiar with the concept of freedom of contract.”

            The only element of coercion and fraud in the proposed contract occurs when the HOA, a governing body, seeks to impose substantive restrictions on sellers …

            Do you have a reading comprehension problem? The seller moved to this neighborhood and chose to buy this house BECAUSE of the CC&Rs that he wanted, approved of, and agreed to. As a homeowner in this community he was a member of the HOA. Where is the coercion? Where’s the fraud? He now wishes to sell this property to a willing buyer who also wants, approves of, and agrees to the restriction on selling to short people.

            You are talking nonsense.

            Like

          • Ron said, “You have failed to establish that consideration for the so-called second part wasn’t included in the agreed price.”

            Nope. I’ve have established that many times. For that additional consideration to have been in the agreed price, the agreed price would have had to have been significantly less than the market value of the home.

            “Unless you are willing to claim that there is some dollar amount or specific form that consideration must take, and that it must be listed separately your argument fails.”

            No. Every residential real estate transaction requires a Settlement Statement that specifically shows what the seller is paying for and the buyer is paying for. An expensive item like a forfeiture of a substantive right by the buyer would be itemized as an item to be paid by the seller. And, that is true even if valuable consideration other than cash is used.

            “Obviously any restrictions and easements or liens must be listed.”

            Existing liens have to be paid during the settlement process and are specifically listed on the Settlement Statement. They are an expense of the seller. Any new liens (if the buyer has to borrow money from a lender) are shown as a source for the buyer. Easements are for utilities that provide beneficial services to the home so they add value. Easements that do not add value result in a substantial reduction in market value of the home. Similarly, restrictions that impair a substantive right of the buyer either result in a substantial reduction in the market value of the home or a significant payment by the seller to the buyer.

            “How would a sales contract look for a property without mineral or water rights”

            It would look like the typical sales contract for real properties sold without mineral or water rights.

            “How many parts would it have and how would consideration be determined for those two missing property rights?”

            Substantive rights have value. They are either factored into the price such that if they are not included then the sales price is significantly below market value for properties that include such rights. No free lunches. You have to pay if you want the buyer to forfeit a substantive right.

            “BTW most real property these days that isn’t strictly rural doesn’t include mineral or water rights.”

            . . . except if the home in built where these rights are valuable. They generally are not addressed in many home sales because most homes are not built on the water nor are they built where minerals are important.

            “If you own a home built in the last 50 years it’s doubtful you own the water underneath it and you may not drill for it.”

            See above.

            “Someone else owns it. Perhaps your local water company. Please use your own argument in your response, and don’t use mine.”

            Your argument has no relevance to the issue of the forfeiture of a substantive right. The party demand such concession has to pay for it.

            “Didn’t you say you’re a lawyer? What type of law do you practice, if I may ask. You seem to be lacking some important basics regarding property rights.”

            Ah, the personal insult “tell” of someone losing an argument. And, this from the guy who thinks people may sue to enforce a contract they are not a party to.

            “Don’t worry, the neighbors will sue to enforce the contract. They and the previously mentioned seller all agreed to not let short people move into their neighborhood, as did the recent buyer.”

            Nope. The neighbors are not parties to the home sale contract. Duh.

            “You: “You are assuming that restrictions and conditions lower the value of the property, but in many cases it’s just the opposite.”
            Me: “Limiting the supply of potential buyers lowers demand, and when demand is lowered relative to supply, prices fall. That is just basic economics.”
            You: “You are not paying attention.”

            You do not understand basic economics either.

            Me: “No. People choose to live in safe neighborhoods convenient to work, schools, shopping, etc.”
            You: “That’s what I said. Please make up your own arguments.”

            No, you did not. You said, “Some people would argue that not selling to people of other races or to short people is one way to help ensure that happens.” Limiting demand does not help increase value of homes in the neighborhood. Duh. Please make sound and logical arguments. And, quit pretending that I am repeating your very bad views.

            “Some restrictions are desirable for that reason. It would be devastating to neighborhood harmony and bliss if families of short people started moving in.”

            Nope. And, it is certainly not desirable to the seller since fewer buyers mean lower demand and likely lower bidding prices. Again, that is just basic economics.

            “Then, you are suggesting here that you can determine for other people what is and isn’t a “proper” contract, which prompted me to ask whether you are familiar with the concept of freedom of contract.”

            “The only element of coercion and fraud in the proposed contract occurs when the HOA, a governing body, seeks to impose substantive restrictions on sellers …”

            “Do you have a reading comprehension problem?”

            Ah, the personal insult “tell” of cognitive dissonance. Please make logical arguments supported by evidence. In other words, dazzle us with your brilliance. When you make silly, unprovoked personal attacks, you are just revealing that you are losing the argument on the merits and need to use a red herring logical fallacy to distract us from your inability to support your position.

            “The seller moved to this neighborhood and chose to buy this house BECAUSE of the CC&Rs that he wanted, approved of, and agreed to.”

            No. He never agreed to forfeit a substantive right that would lower the future sales price of his property. The seller has to pay for that. If he does not, then there is no consideration given and that part of the contract fails.

            “As a homeowner in this community he was a member of the HOA. Where is the coercion?”

            The two parties to the contract are the seller and the buyer. The seller won’t pay for the forfeiture of the buyer’s substantive right and he won’t take the time and expense to enforce it if the buyer violates it at a future date. The buyer does not want to forfeit a substantive right without just compensation. So who wants it? The HOA and other home owners. None of them are parties to the sales contract. The seller and buyer do not care about the other homeowners. So how does the restriction get in the sales contract? The coercion of the HOA, a governing body.

            “Where’s the fraud?”

            My mistake. I should have used the word “duress.”

            “He now wishes to sell this property to a willing buyer who also wants, approves of, and agrees to the restriction on selling to short people.”

            Nope. The buyer agrees to it knowing it is unenforceable in the courts because it is an unreasonable restraint on trade. The seller puts it in there but still demand the full market value of the home as the sales price. No one wants it except non-parties to the contract. And, a governing body known as an HOA.

            “You are talking nonsense.”

            Ah, another personal attack “tell” of cognitive dissonance.

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          • Ron said, “Please ignore the three paragraphs above beginning with “Some restrictions are desirable for that reason.””

            I left them in. My responses in those paragraphs perfectly explain why your argument is wrong.

            Like

  5. Greg:

    For sure the lefties in the Bay Area love zoning and other stipulations on property use.

    But have you ever been to GOP country in Orange County, CA? Try putting up a 50-story condo tower in Newport Beach. You can’t. How about the two-acre lot minimums of Connecticut?

    In fact, I would say the richer the neighborhood, the most extensive and rigid is the zoning—such as acreage minimums, requirements for garages, setback from property-line laws, no steel container housing etc etc etc. In some communities you must have grass lawns!

    If the rich are more generally GOP (I think so), then it is a fair deduction that it is GOP’ers who most support property zoning. And that makes sense—can you imagine proposing and then building a condo tower in the middle of a single-family detached luxury neighborhood? How about with ground-floor retail? They have (zoned) property value to protect! And if free markets hurt the upper class, then free markets will not be favored.

    In fact, what we have is an economic elite that runs huge annual trade deficits, and wants open borders for illegal immigrants, but then makes sure its own housing situation is highly zoned and controlled.

    Re the annual trade deficit: Well, if the US runs a $500 billion trade deficit, the people offshore have to do something with their money, They are not buying goods and services, so they buy US assets, Not only housing, sometimes businesses, sometimes US Treasuries. But housing is a favored asset class, perhaps because it is zoned and supply-constrained.

    Anyway, I’ll say it again: Due to the imperatives if globalism, you cannot have property zoning in the U.S. Step aside for the bulldozers. Besides which, I think property owners have property rights, including developing as they see fit.

    Yes, one property owner can always buy right of first refusal on surrounding properties. There are free market solutions.

    Like

  6. Benjamin, it would be incorrect to say that establishment Republicans were for free enterprise and smaller government. In fact, many establishment Republicans love bigger government as much as left wing Democrats do. That is why George Carlin was right when he said, “Bipartisan usually means that a larger-than-usual deception is being carried out.”

    I read an article recently that said the rich were pretty evenly split between the parties. My personal experience is those who earned their wealth tend to be Republican, while those who inherited it or benefitted from political cronyism were Democrats.

    It is logistically impractical and financially infeasible to build a condo tower in the middle of a single-family detached luxury neighborhood.

    Yes, we do have an economic elite that runs huge annual trade deficits, and wants open borders for illegal immigrants, but then makes sure its own housing situation is highly zoned and controlled. Her name is Hillary Clinton. And, her co-conspirators are members of the Democratic National Committee.

    Yep, and those foreign investors have a historically bad track record. They bid up US properties (which is good of the US owners selling those properties) and then years later have to sell the properties for much less than they paid. And, the ones buying back the properties at lower prices are US citizens and companies. Not a bad deal. The first rule of investing in real estate is never buy properties in areas that you do not know very, very well.

    A lot of laws and regulations are bad. In a voluntary cooperative environment, your concerns about needing regulations to protect US citizens are invalid.

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    • “It is logistically impractical and financially infeasible to build a condo tower in the middle of a single-family detached luxury neighborhood.”–Greg

      Oh, come. Really? That is why property zoning is so intense and enforced in “exclusive” neighborhoods? Because no one would develop those parcels to highest and best use?

      Start with property zoning. Once that is abolished, the rest will take care of itself. Make that your first goal. It is primary—we are talking about basic property rights as well.

      Plus, do everything possible to decriminalize push-cart and truck-vending.

      What would Frederic Bastiat say?

      Like

  7. “Oh, come. Really?”

    Yep. It is logistically impractical and financially infeasible to build a condo tower in the middle of a single-family detached luxury neighborhood. Condo towers take a lot of room. Much more than the normal single-family home even in a luxury neighborhood. And, it has to make economic sense to those who are able to finance such a project.

    Property zoning is not going away because government is not going away.

    Regulation of push-cart and truck-vending is not going away either because government is not going away and many of these vendors benefit from the regulation.

    “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.”
    Frédéric Bastiat

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    • Condo builders cannot buy multiple parcels? And as for building in the exact middle, how about whacking several homes off an edge of a ingle-family detached district, as a starter? Then, creep in from there. That is how I would do it. Makes street-widening easier, so when the bulldozers really start plowing in, they will have room to roam.

      Anyway, you largely agree with me. These regulations against free markets in property use, and against street vendors are perversions, and promulgated by the powerful.

      As I say, send in the bulldozers and then send in the food trucks, and then the push-carts and let freedom and commerce take over!

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  8. “Condo builders cannot buy multiple parcels?”

    Why, yes, they can? Which means that they will have to buy up most of the single family residential neighborhood. Also most condo towers need to be close to shopping, restaurants, entertainment venues, etc, which most single family residential neighborhoods tend to be for families who want a bit of distance from all that. So, it is unlikely that anyone would finance a project to build a condo tower in a single family residential neighborhood.

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    • Greg: I conclude the topography and layout in your city is a lot different from West Coast cities.

      Condo developers would love to march into Newport Beach CA and build thousands, perhaps tens of thousands of units. I think they should too.

      Up and down the West Coast the price of housing validates a lot of effort in construction. Unshackled from zoning, I think you would see a building boom for a generation on the West Coast, which would help lower housing costs and bring in new businesses.

      Anyway, it should be up to free markets how land gets developed. Not local zoning ukases.

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      • Benjamin, you would assume incorrectly.

        Condo developers may want to build in Newport Beach, but that does not mean they will do so if the project is economically or logistically infeasible.

        Perhaps. A lot of zoning laws in California is meant to protect existing homeowners by limiting the supply of residential units relative to supply.

        I agree that individuals should, through unrestricted markets, develop real estate and residential housing. Government employees do not know what is best. Their goal is to protect the existing political class.

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