Mom and Dad are aging. They have more house than they need, and at their ages maintaining it has become an unmanageable burden. Their friends have begun to die off, they are close to giving up their driver’s licenses, and the kid has long since grown up and moved away. The sensible thing to do is to change not only their type of housing (trading in a single family home for a unit in assisted living) but also the location of their dwelling. They want to move to the far-away city where their beloved son, Junior, has made his home, so they can see the grandkids regularly, and so they won’t be reliant on strangers for support when their health rapidly declines.
There is an impediment to the move, though. Junior’s career is such that he does not have locational stability. He’s enjoying Las Vegas now, but his employer has offices all over, and it was just three years ago that he was relocated from St. Louis. Mom and Dad are willing to move to Vegas, but what if Junior gets relocated to Boston or, God forbid, San Francisco in another year? They couldn’t afford to follow him to such an expensive metropolitan area. Their savings wouldn’t last long. So they stay put, waiting for the inevitable crisis, and hoping that Junior will be able to drop everything and get on a plane when the time comes.
* * *
Angelica and Dev are married to each other, and they are both tenured academic economists at a state flagship university in a college town. Angelica is regarded as a research superstar whereas Dev is deemed an able but not exceptional scholar. A number of well-regarded business schools are considering trying to hire the couple. But there is one factor holding them back: Faculties worry about what happens if the couple divorces. While they are happy to hire Dev if it means hiring Angelica, they worry that if their relationship deteriorates Angelica will leave, and the hiring school will be stuck with Dev, who they would not have appointed independently. When they attend academic conferences, Angelica and Dev face a peculiar barrage of subtly intrusive questions about the state of their marriage and why they have not had kids. Lateral offers never materialize, even though both Angelica and Dev would prefer to move to a better-resourced business school.
* * *
A real estate developer sees an opportunity to do something transformative at scale. There’s a largely vacant stretch of Cleveland where the local public schools have been hollowed out as the neighborhood has deteriorated. So a developer has acquired land containing hundreds of housing units on the cheap, with the hopes of turning a mostly depopulated neighborhood and its hanging-by-a-thread public school around. He pitches lovely rehabbed brownstones to families who are interested in putting down roots and seeing their kids grow up with the cultural amenities of a big city and the neighborhood stability of a small town. There is just one problem—everyone worries that families will flee at the first sign of trouble. If that happens, then the neighborhood will quickly spiral. A critical mass of a few hundred kids from middle-income families will make the schools work, but if even a dozen families leave the neighborhood and aren’t replaced, then the economics of a local school will no longer make sense, and the remaining families risk having their kids bused to adjacent areas with under-performing schools.
If the first generation of homeowners could just promise each other that they would not depart their new neighborhood for a lengthy period, then the neighborhood and its public school will flourish and generate momentum. But the law prohibits restraints on alienation, so even if the initial homebuyers make a promise to remain in place for a decade, that is not a promise the law is willing to enforce. As a result, the promising idea for an attractive in-fill development never gets off the ground.
* * *
One of the many virtues of Lee Fennell’s terrific new book, Slices & Lumps: Division and Aggregation in Law and Life, is her insistence that property scholars vigilantly seek out gaps in existing arrangements. Where there’s a gap, there’s an opportunity to unlock suppressed value. In this symposium Essay, I will discuss the interdependence of residential location choices and ways in which the law might “mind the lump” as Fennell would say. Stated succinctly, my thesis is this: Sometimes in order to induce people to relocate today it is necessary to protect them against the possibility that they may need to move unwillingly tomorrow. Property law should provide mechanisms that protect people ex ante in these situations where they are willing to move once but not make subsequent moves. A co-location covenant, which would require people to move to a different location together or remain in place, is one institutional reform worth embracing, at least in limited contexts. The proposal is directed at increasing net mobility, and it paradoxically accomplishes this by removing ex post unilateral exit options.
Here is the core of the problem. When an individual buys a piece of property in fee simple absolute, which is the dominant form of ownership, she almost invariably is purchasing a right to alienate it freely. Free alienation often serves significant economic interests, mostly by ensuring that land ultimately winds up in the hands of the party that values it the most and presumably can put it to its highest and best economic use. Yet the ability to alienate comes along with the power to create negative externalities for neighbors, who may suffer if a positive-externality generating neighbor decides to decamp. It is easy to imagine loss aversion kicking in when a beloved neighbor leaves the block—building neighborly relationships takes time and effort, so the departure of one family can impose real harms on those who remain. The departure of a bellwether neighbor may trigger a chain reaction of subsequent exits, putting increased pressure on those who remain. This is a point that Fennell rightly emphasizes in chapter 2 of her book, discussing the aftermath of Superstorm Sandy. Moreover, the fear of these negative externalities may make people more reluctant to purchase property in a neighborhood ex ante.
To be sure, people have tried to tie the hands of a new owner in various ways, so as to prevent this problem. Sometimes people even try to tie their own hands as a kind of precommitment device. But the courts are generally dubious of these sorts of efforts. For example, in the 2016 case of Davis v. Davis, the North Carolina Court of Appeals invalidated on public policy grounds a self-imposed restraint on alienation. The Davises had a fee simple, and they conveyed the remainder interests following their life estate to their children while retaining the life estate. In so doing they specified that their life estate was “to be personal to the use of the Grantors . . . and may not be utilized by any other person.” Following the death of her husband, Ms. Davis tried to rent out the property to vacationers, and two of her (shockingly ungrateful!) kids sued to stop her. She won, because the court held that even this self-imposed restraint on the alienation of her life estate was contrary to public policy.
The Davis court’s hostility to restraints on alienation was such that even one of limited duration—a life estate tied to the lifespan of a senior citizen—and even one that was self-imposed —which at least in theory meant all the externalities were internalized by the party restraining alienation—was invalidated. It is unclear whether the invalidation was predominantly caused by knee-jerk opposition to restraints on alienation or understandable misgivings as to whether Ms. Davis actually understood she was tying her own hands when she agreed to limit the alienation of her land.
In light of this core doctrinal hostility to restraints on alienation, it seems unlikely that courts applying common law rules would tolerate the implementation of an anticommons design, whereby no one could leave a multifamily development or subdivision unless all the other families agree to permit the sale. The creation of new residential subdivisions that contained covenants limiting the ability of the first generation of owners to alienate their interests to other owner-occupiers for some period of time seems likely to encounter similar hostility, even if those sorts of limits were imposed reciprocally on all the owners in the development. That said, analogous arrangements do exist in corporate start-ups, where key employees and other insiders may be unable to sell a company’s stock until the expiration of a lock-up period. And in the wake of an extensive re-assignment of title from Oahu’s land oligarchs to existing renters, the renters-turned-owners had their ability to sell constrained with a government right of first refusal that lasted for ten years. These kinds of rights of first refusal exist with respect to other affordable housing programs too, though they seem primarily designed to prevent people from flipping affordable housing for profit.
Specific legislation could overrule the common law on these issues, but the implementation challenges could be significant. A family might buy into a residential development fully intending to stay there for the long haul, but then external circumstances, such as the loss of a job or the death of a breadwinner, could intervene. Keeping homeowners from selling their residences early in those scenarios could spell financial ruin, and if an anticommons mechanism is employed any holdouts could attempt to extract something of value from a homeowner desperate to depart. These are the sorts of “poor foresight” costs that the law of property puts front and center, and they help explain the law’s broad hostility to restraints on alienation. These concerns are legitimate, but one point of this paper is to note that there are substantial countervailing considerations that the law is not presently taking into account. Excessive doctrinal rigidity results.
Even in the context of smaller groupings, an anticommons arrangement seems unlikely to work. To return the aging parents example with which this essay began, it seems unlikely that Mom and Dad will block Junior’s departure from Las Vegas—they’ll just suffer significant disutility from it. Indeed, were they to exercise a hypothetical right to block Junior’s exit it is likely they would lose the very thing they are trying to preserve—the love and support of an adult child who is willingly assisting his aging parents.
In these situations, it may well be that the best approach the law of property could provide would be to begin enforcing a kind of co-location covenant. In purchasing a home subject to such a covenant, Junior could deprive himself of the power to transfer title unless and until other identifiable individuals (Mom and Dad) were also able to sell their home for an agreeable price. Additional provisions could be included making Junior’s sale further contingent on Mom and Dad’s success in securing housing in the new location that’s as proximate to Junior’s new home as their existing dwelling was to his old one.
To be sure, one potential issue with such an arrangement is that Mom and Dad could make a contractually binding promise to avoid enforcing the covenant, or they could enter into a release agreement that would have a similar effect. Still, a co-location covenant would put the burden of action on Junior and his buyer, rather than on Mom and Dad, and that may alter the dynamics in a way that makes it more likely Junior will feel duty bound to live up to his promise. Mom and Dad may feel more within their rights to refuse to bless a move as opposed to suing to enforce a bargain into which Junior entered. Switching the default, in short, may affect the psychological stakes for the family. And if Junior is unable to convince Mom and Dad to enter into a written waiver, he is likely stuck, since a Title Insurer will be reluctant to issue a policy underwriting a land transaction that could be unwound so easily by a third party. As a result, any prospective buyer who had something less than a written waiver from Mom and Dad would be spooked.
If Mom and Dad did not trust their future selves, they could even insist on a more ironclad form of protection. Presumably the beneficiary of the covenant could be a corporate entity that would be established with a mandate to refuse to bargain away its benefit. In that sense Junior could precommit to avoid a unilateral departure in a way that would avoid the awkwardness that would arise if he subsequently changed his mind and asked Mom and Dad to release him from his promise. That might be the only kind of promise strong enough to induce a move by Mom and Dad to Vegas.
A binding promise to move to a community where Mom and Dad would be able to secure proximate housing would also influence Junior’s decision-making. Suppose Junior had job offers in a couple of different places, one with a more exciting job but a higher cost of living and the other with a less fun job and a lower cost of living. In the absence of an enforceable covenant, the law would not affect his calculus. Junior might take the second job, but only out of a sense of moral obligation to move to a community where his parents’ relocation would be realistic. An enforceable co-location covenant would supplement a moral obligation with a legal one.
The co-location problem has general application. Consider the case of Angelica and Dev, introduced at the outset. It is precisely because the two of them cannot make a binding commitment to stay on the same faculty over the long haul that they face discriminatory treatment. Many business schools would be delighted to make job offers to both if they could be assured that they will either get to keep them both or lose them both simultaneously. But no faculty wants to be the permanent landing spot for the merely good scholar and a stepping stone for the big-shot. In this situation, Angelica and Dev could address the skepticism that prevents schools from making offers by entering into a co-location covenant. They will purchase a single family home with an embedded covenant that requires them to either relocate jointly (say, to a community 100 miles away or more) or remain in place. A co-location covenant might come to resemble covenant marriage, and a university’s ability to insist on a co-location covenant for Angelica and Dev could prompt a worried faculty to extend joint offers to the couple when they otherwise wouldn’t. In that way, the existence of co-location covenants could induce beneficial third-party reliance.
Similar dynamics can arise in contexts more common than academic spousal appointments. A particularly high-stakes one arises when a two-career couple with kids divorces. The joint custodial arrangement may well have the effect of locking both former spouses into a particular community for the duration of their kids’ childhoods even though they each could secure better professional or personal opportunities elsewhere, albeit not in an overlapping elsewhere. One impediment to the willingness of a cooperative ex-spouse to contemplate a merely Kaldor-Hicks efficient move is the lack of guarantee that this move will really be the last one. Co-location covenants could help solve that problem by creating property rights to remain that would not be subject to a future balancing-of-equities calculus in family court.
If they become part of real estate developers’ toolkits, co-location covenants could address the collective action problem that makes it so hard to turn around neighborhoods that have seen better days or are not currently residential in character. A new residential development is a fragile thing. If enough first-generation owners try to flip their units just as the community is getting off the ground, it can send a signal to prospective buyers that there is something wrong with the community. A high degree of residential turnover might also impede municipal governments’ willingness to invest in local public goods, and the lack of investment might generate a chicken-and-egg problem for the neighborhood. (The government wants to see residential stability and the prospective residents want to see a commitment of government resources.) As the sides wait each other out, a potentially successful development could stagnate.
Before concluding, let us consider one final scenario—this one based not on a hypothetical situation that presumably arises from time to time, but based on a real case. In Poletown Neighborhood Council v. City of Detroit (1981), Detroit condemned a vibrant working class neighborhood that had a distinct identity tied to the Polish ancestry of so many of its residents. The neighborhood was condemned in part because of its proximity to the city center and major freeways. Approximately 1,500 homes were seized using eminent domain, with the City enticed by General Motors’ insistence that thousands of jobs would be created at the new automobile assembly facility. The project did not create as many jobs as were promised, nor was it especially long-lasting. General Motors shuttered the Poletown factory recently, a mere 33 years after it opened. Certainly with the benefit of hindsight, and quite possibly without it, Detroit made a bad bet. While the Michigan Supreme Court initially blessed the Poletown taking in Poletown Neighborhood Council, a subsequent opinion by the same court in County of Wayne v. Hathcock (2004) reversed course, and the taking could not happen today, at least not under the Michigan Constitution.
One of the ways in which the Poletown taking was tragic relates to the substantial cohesion of the neighborhood that was razed to make way for the auto assembly plant. Poletown was economically poor, but it evidently was rich in terms of social capital. Various critics of the use of eminent domain bemoaned the irreplaceable loss of these attributes that inevitably accompanied the City’s decision to use eminent domain and then transfer the newly acquired property to General Motors.
But was that loss really inevitable? To be sure, the residents of Poletown were emotionally attached to their land, and they were no doubt even more closely tied to their homes, the buildings where their congregations prayed, and their favorite businesses. But more than that, it seems likely that they were tied to each other. As Fennell notes in chapter 9, sometimes it’s better to keep a community entirely intact in half-built homes than it is to provide fully built homes for half the community. A sensible approach to the problems of Poletown, then, would have been to permit the exercise of eminent domain, provided that the City or its automotive partners identified another proximate neighborhood and agreed to move the displaced Poletown residents there en masse. If Poletown really provided the best geolocation for the factory, and the other alternatives did not make sense, then shifting the Poletown residents to a different part of town, where land values were presumably lower but the housing stock was comparable, would have mitigated the damage resulting from the government’s act. Rather that flatly prohibiting economic development takings, as many jurisdictions have done in the wake of the Supreme Court’s Kelo decision, a state legislature might permit economic development takings only when communities are relocated at sufficient scale to replicate the existing ties that made the displaced community appealing. After bouncing this idea off of Lee Fennell, I learned from her that something a lot like this happened in Ellenton, South Carolina. The US Atomic Energy Commission decided it wanted to build the Savannah River Plant there in 1950, so the government moved most of the town’s residents to New Ellenton, eight miles away.
What of Poletown residents who refused to join their neighbors in their new environment? To be sure, they would be entitled to monetary compensation. Recreating Poletown in a different part of town, though, would require some level of critical mass. So if 80 percent of Poletown residents decided to take the money and run, then it seems likely that the effort to recreate a cohesive community elsewhere would fail. Accordingly, it may be appropriate to compensate the residents who move to the new Poletown above 100 percent of the market value of what they have lost—perhaps they could receive housing of equivalent value to what the city condemned, plus a cash bonus. The state and federal constitutions establish a lower bound for the compensation owed to those who lose land via eminent domain. But the absence of a Givings Clause means there are not obvious limits on the ability of the state to pay property owners more than the land is worth, and this tactic is employed so as to discourage litigation that will slow down public projects, and perhaps for less savory reasons. A takings remedy that recognized the positive externalities that can arise when residents of a successful neighborhood move together would simply provide extra compensation to residents who conferred positive externalities on their neighbors by remaining committed to the neighborhood project even as the neighborhood’s boundaries shifted. In that sense, we can imagine creative takings remedies akin to Lee Fennell’s brilliant idea of a “floating fee.” Neighborhoods can float too, and not just in Amsterdam.
When it comes to co-location covenants, and perhaps everything else, the devil is in the details. As with any useful property innovation, there is a potential for abuse. At the outset it seems obvious that co-location covenants could become a tool of pro-segregation homeowners who wanted to thwart blockbusting. This problem has a straightforward solution. The implementation of co-location covenants would not repeal the Fair Housing Act, and if the purpose and effect of a co-location covenant was to preserve a neighborhood’s racial homogeneity then Shelley v. Kraemer would continue to apply.
A more troublesome objection is that co-location covenants could cause people to become trapped in the wrong place (or the wrong relationship), thanks to bad planning, changed circumstances, or the like. To accommodate these kinds of concerns it is desirable to introduce at least a little bit of flexibility into co-location covenants. If Dev becomes abusive towards Angelica, we want the legal system to allow her to move far away from him. If a resident suffers a major injury that limits his physical mobility, the law may want to let him relocate to a more accessible community. For these reasons it will sometimes make sense to provide the person seeking to avoid the continued application of a co-location covenant with an opportunity to argue that extrinsic circumstances have changed enough to warrant relief from the merciless application of the covenant. For obvious reasons, prevailing on these kinds of arguments should not be made unduly easy. Otherwise co-location covenants will accomplish little. But taking steps like shifting the legal burdens to the party seeking to avoid the application of the covenant, imposing temporal limits of a decade or two on the duration of co-location covenants, and using liability rules rather than property rules when a co-location covenant is breached should help society find the happy medium between excessive rigidity and too much flexibility. The law could even consider alternative approaches grounded in the same spirit, such as rules requiring homeowners in a new community to pay an amount of money up front that is returned to those first generation homeowners who remain in the community for a decade or some other pre-determined length of time. In short, covenants are an appealing way to incentivize co-location choices that induce desirable moves and promote reliance interests, but they are not the only way that property law could further those important objectives.
Property law is excessively hostile toward an important form of lumping. Namely, people often have a desire to move together or not at all. The fear of moving and then being left behind by friends or relatives, paradoxically, may cause people to remain in place. The result may be suboptimal location choices. In this Essay, I have suggested that the law ought to let people precommit to alienate or move their residences only if specific third parties who are tied to them alienate or move homes as well. To be sure, there are tradeoffs associated with such regimes, and some of the reasons why courts are hostile to restraints on alienation would apply to these co-location covenants. Yet the law’s resistance to these restraints has become unduly rigid. At least in limited contexts, hostility to restraints on alienation might actually undermine property law’s overarching interest in enabling that land comes to be owned and occupied by the party that can put it to its highest and best use.
Pushing the point further, a similar legal intervention might help constrain the worst abuses associated with large-scale economic development takings. The most forceful objections to these kinds of takings, with the Poletown case being the most notorious of them, is not that they disrupt the relationship between people and land but that they disrupt relationships among people. Inspired by Lee Fennell’s brilliant work, we should recognize that one form of disruption need not entail the other.
Lior Jacob Strahilevitz is the Sidley Austin Professor of Law, University of Chicago. The author thanks Lee Fennell, Hiba Hafiz, John Infranca, Jeff Leslie, Darrell Miller, and Michael Pollack for helpful comments on an earlier draft, as well as the Carl S. Lloyd Faculty Fund for research support.