Private Neighborhoods and the Transformation of Local Government

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In Private Neighborhoods and the Transformation of Local Government, Robert H. Nelson effectively frames the discussion of what minimal government might look like in terms of personal choices based on local knowledge. He looks at the issue from the ground up rather than the top down.

Nelson argues that while all levels of American government have been expanding since World War II, people have responded with a spontaneous and massive movement toward local governance. This has taken two main forms.

The first is what he calls the “privatization of municipal zoning,” in which city zoning boards grant changes or exemptions to developers in exchange for cash payments or infrastructure improvements. “Zoning has steadily evolved in practice toward a collective private property right. Many municipalities now make zoning a saleable item by imposing large fees for approving zoning changes,” Nelson writes.

In one sense, of course, this is simply developers openly buying back property rights that government had previously taken from the free market, and “privatization” may be the wrong word for it. For Nelson, however, it is superior to rigid land-use controls that would prevent investors from using property in the most productive way. Following Ronald Coase, Nelson evidently believes it is more important that a tradable property right exists than who owns it initially.

The second spontaneous force toward local governance has been the expansion of private neighborhood associations and the like. According to the author, “By 2004, 18 percent—about 52 million Americans—lived in housing within a homeowner’s association, a condominium, or a cooperative, and very often these private communities were of neighborhood size.”

Nelson views both as positive developments on the whole. They are, he argues, a manifestation of a growing disenchantment with the “scientific management” of the Progressive Era. He thinks the devolution of governance below the municipal level to the neighborhood should be supported through statutory and state constitutional changes.

Although about one-third of all new housing since 1970 has been built within some form of neighborhood association, the majority of older neighborhoods fall outside this trend. Establishing neighborhood associations in these areas is difficult because the requirement for a homeowner to join is typically written into the deed, and this would be extremely costly to do for every home in an older neighborhood.

Nelson proposes a six-step solution that involves (1) a petition by property owners in a neighborhood to form an association, (2) state review of the proposal, (3) negotiations between the city and the neighborhood, (4) a neighborhood vote on the proposal, (5) a required supermajority, perhaps 70 percent, for passage, and (6) a transfer from the municipality of legal responsibility for regulating land use in the neighborhood to the unit owners of the association.

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