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Article Excerpt
The theory that one's home is a psychologically special form of property has become a cherished principle of property law, cited by legislators and touted extensively in the legal scholarship. Influential scholars, most notably Margaret Radin, have asserted that ongoing control over one's home is necessary for an individual's very personhood and ability to flourish in society. Other commentators have expounded a communitarian vision of the home as rooting individuals in communities of close-knit social ties. Remarkably, the legal academy has accepted these theoretical accounts of the home without demanding a shred of empirical evidence. The misplaced belief in the psychological primacy of the home has encouraged the overproduction of home-protective legislation and added a gloss of moral legitimacy to rent seeking. In light of the political groundswell to "save homes" and the social costs of residential protectionism, it is time for a critical reexamination of the psychological importance attributed to the home. Drawing on the research literature in psychology, sociology, and demography, this Article argues that there is scant evidence to support the theory that one's home is a special object that constitutes psychological personhood or enables a rich web of territorial relationships. The psychology research illustrates the primacy of social relations, not possessions, to self and flourishing. The sociological and demographic data indicate that closely-knit, low-turnover territorial neighborhoods are the exception, not the norm. In view of the high costs and limited psychological benefits of protectionism, I advance an evidence-based and minimal approach to residential protection.
TABLE OF CONTENTS INTRODUCTION I. RESIDENTIAL PROTECTIONISM: THE COSTLY MYTH OF HOME A. Overproduction of Home-Protective Legislation B. The Legal Mythology of Home II. THE HOME AS PROPERTY FOR PERSONHOOD: A REVIEW OF THE PSYCHOLOGICAL EVIDENCE A. The Nonprimacy of Home to Self-Constitution B. Relocation and Psychological Flourishing C. Other Correlates of Flourishing: Homeownership, Life Satisfaction, and Self-Esteem D. Conclusions III. RESIDENTIAL COMMUNITARIANISM: EVIDENCE FROM SOCIOLOGY AND DEMOGRAPHY A. Our Town Revisited: Neighborhoods and Weak Ties B. Demographic Mobility C. Residential Stability, Homeownership, and Positive Externalities IV. RETHINKING RESIDENTIAL PROTECTIONISM A. Dismantling the Legal Mythology of Home: Implications for Property Theory B. Rent Seeking Masquerading as Moral Conviction C. A Minimal Theory of Home Protection D. Life-Cycle Effects and Home Protection V. REVISING THE LEGAL THEORY OF HOME: OBJECTIONS AND CONSIDERATIONS A. Preferences Versus Flourishing B. Castles and Control C. The Fear of Mass Destabilization D. What About Poletown?: Protection for Exceptional Communities VI. APPLICATIONS A. Eminent Domain B. Homestead Exemptions CONCLUSION
INTRODUCTION
Residential real estate has achieved an exalted status and privileged position in American property law. In the past century, there has been a proliferation of legislation that protects and privileges homeowners by reducing the risk of dislocation and extracting rents to the detriment of non-owners and lower-income owners. I term this movement "residential protectionism." The panoply of home-protective legislation includes bankruptcy protections, property tax relief, and most recently foreclosure reform and state eminent domain legislation. Residential protectionism has imposed social costs by encouraging excessive investment in residential real estate, raising the cost of credit, creating regressive tax subsidies, and frustrating land planning. (1) Despite these costs, protective legislation has attained the stature of moral right. A compelling justification attributed to such legislation is that it safeguards one's (particular) home as a wellspring for psychological flourishing. Involuntary dislocation wreaks psychological devastation and imperils self and identity--one's very personhood. (2) The belief that ongoing control of one's home is a psychological imperative has become a tenet of American property law, discussed and conceded in every first-year property class and touted extensively in the legal scholarship. The legal academy has accepted this theoretical notion as fact and in doing so facilitated the home's illustrious and uncontested reign over American property law. (3)
Property scholarship spins an alluring tale of how the force of law stands as a vigilant guardian over the personal and psychological values of the home. Few articles have enthralled property theorists as Margaret Radin's theory that certain kinds of property, including homes, are constitutive of personhood. (4) Radin argued that ongoing control over objects, such as homes, that are "bound up" with one's self is necessary for proper self- constitution and psychological flourishing. (5) Personhood theory infused a generation of scholarship, engraining the notion that homes are special objects deeply intertwined with psychological functioning. Scholars have cited the personhood value of the home to support constraints on government takings, to justify property redistribution, and more generally to offer a long-awaited reprise to economic theory. (6) In a separate vein, a number of community-development and communitarian scholars have advocated legal protection of the home based on a theory of territorial social relations rather than individual identity. They argue that home protection furthers important normative interests by situating individuals in strong and meaningful networks of social ties. (7) Astonishingly, no one has questioned whether empirical evidence exists to support these theories.
The widely held belief that homes are psychologically vital to their owners has added a gloss of moral legitimacy to home-protective legislation. One motivation for legal protection is the desire to safeguard the perceived psychological and social value of the home. More often, the impetus is rent seeking by special interest groups, competition between states to attract residents, or grandstanding by politicians anxious to capitalize on the evocative chord of home protection. (8) The legal mythology of the home (and the legal academy's reflexive acceptance of this notion) has disguised rent seeking with rhetoric and recast economic protectionism as a humanistic endeavor.
Moreover, the mythology of home and residential protectionism are self- perpetuating. If property law treats the loss of home as the amputation of one's very identity and ability to thrive, then owners are likely to construe dislocation as a dire event. (9) Thus, residential protectionism creates the very demoralization costs it seeks to redress and increases political demand for home-protective legislation.
In light of the social costs of protectionism and the political groundswell to "save homes," it is time for a critical reexamination of the importance attributed to maintaining one's home. Drawing on the research literature in psychology, sociology, and demography, this Article argues that there is little evidence to support a categorical theory of ongoing control over one's home as a prerequisite to psychological flourishing. Psychology research shows that people may like their homes, imbue their homes with a certain emotional resonance, and utilize their homes to reflect and display identity. But there is scant empirical support for the proposition that homes are requisites of psychological functioning such that object loss imperils the dispossessed owner's self-concept or impedes psychosocial functioning. (10) Indeed, there is little evidence that consumer possessions in general are primary or requisite constituents of self or flourishing. (11) Instead, the empirical research indicates that the prerequisites for human flourishing are social relations and interaction, not ownership of certain types of property. (12)
Community-development and communitarian scholars have long recognized the value of social relations as a normative matter (if not an empirical one). (13) These scholars take a more instrumental view of the benefits of residential stability. However, some of these accounts have romanticized territorial ties and oversimplified neighborhood social networks. (14) Homes do not situate individuals in tight-knit communities marked by deep affective ties. To the contrary, sociological and demographic research shows that neighborhoods are characterized by weak and intermediate ties, and there is evidence that neighborhood sociability is in decline. (15)
An evidence-based theory of home protection is long overdue, particularly in view of the recent upsurge in home-protective legislation and national attention to residential real estate. The humble home has also seized the limelight in property scholarship, with heated debates over the psychological value of the home in the contexts of takings legislation, foreclosure, and affordable-homeownership initiatives. Prominent articles have proposed compensation models for psychological losses from eminent domain, (16) examined how "homevoters" shape land use law, (17) and considered foreclosure reform for residential real estate. (18)
This Article offers a new perspective on these perennial debates in property law by distilling the empirical research on homes. The central claim of this Article is that the psychological and social benefits of remaining in a particular home do not warrant the vast apparatus of categorical protections that pervade American property law. We may opt to retain these protections for other reasons, but they cannot be justified on a theory of the home as psychologically vital. A corollary is that the legal academy has been unduly deferential to conjecture about homeowners' subjective preferences while neglecting entirely the data on objective psychological outcomes. In light of the psychological evidence, and absent compelling economic or other justifications, I advocate reducing the number and scope of home-protective laws.
This Article focuses on home-protective laws that reduce dislocation and extract rents for owners, not on the case for home buying versus renting. Yet the subtext of my analysis suggests that, although not fabricated, the benefits of home buying have been overstated and oversimplified. Homeownership conveys benefits in the form of transaction cost savings from eliminating negotiations with a third party landlord, efficiency gains in local knowledge acquired during long-term tenure, and modest increases to neighborhood social capital. (19) Yet, ownership imposes costs by limiting mobility in response to changed personal circumstances, professional needs, and neighborhood decline, and by channeling disproportionate investment into an undiversified asset. The research shows moderate, not overwhelming, psychological gains from homeownership; strikingly, for low-income or financially strained owners, there is evidence of psychological harm. (20) On balance, the benefits of homeownership are not as high or invariable as legal scholars have assumed. While it is beyond the scope of this Article to examine in any detail the comparative merits of home buying versus renting, my analysis calls into question the degree of enthusiasm for home buying saturating the legal literature.
Before proceeding, I offer a few clarifications and caveats. My thesis is that the legal scholarship has vastly overstated the primacy of the home, not that homes lack any shard of psychological or non-economic value to their owners. I acknowledge that dislocation, particularly in contexts such as foreclosure, imposes short-term psychological stress. However, I argue that we have been overly attentive to short-term psychological costs and paid no heed to long-term outcomes. I do not argue that homelessness is a psychologically benign condition or contest the claim that in contemporary, capitalist societies private property rights and some quantum of private property ownership (i.e., wealth) is instrumental to personal thriving. (21) Rather, I maintain that the sanctity bestowed by American property law on one category of private property, residential real estate, is not warranted based on the psychological and sociological evidence.
To clarify the scope of my analysis, I use the term "home" to refer to owner-occupied residential real estate. I focus on owners rather than renters because most home-protective legislation safeguards ownership interests; however, much of the psychological research applies with equal force to renters. My analysis targets the typical homeowner in the United States, not the comparatively rare instances of multigenerational family dynasty property, uniquely tight-knit enclaves, or extreme separatist communities. Other authors have ably addressed legal reforms to protect these special interests. (22)
The Article proceeds as follows. Part I considers the array of special protections for the home in American property law. The legal mythology of home underpinning residential protectionism--the belief that one's home is psychologically critical--dominates legal scholarship, legislative debate, and cultural consciousness. Home-protective legislation, justified in significant part by this vision of the home, imposes high social costs in absolute and distributive terms. Part II examines the empirical research on the home's role in self-concept and psychological functioning. I conclude that there is scant empirical support for some of the logical distillations of personhood theory, namely that homes are primary to self-concept and that dispossession harms long-term psychosocial flourishing. Part III considers an alternative justification for residential protectionism--the theory that homes root individuals in robust networks of strong, territorial relationships. The sociological and demographic literature belies this theory. The research shows that community ties are more transient, weak, and replicable than commonly assumed. Part IV argues that the misplaced belief in the psychological primacy of maintaining one's home has legitimized rent seeking and increased the number and scope of home-protective laws. To the extent that the justification for protection is psychological, I advocate an evidence-based and minimal approach to home-protective legislation. Part V responds to potential objections to revising the legal theory of home. Part VI considers by way of illustration how an evidence-based approach to residential protection informs current debates in takings law and homestead exemptions.
I. RESIDENTIAL PROTECTIONISM: THE COSTLY MYTH OF HOME
Residential real estate has become the demagogue of property law. The considerable array of home-protective legislation includes homestead exemptions and tenancy by the entirety, tax benefits, and most recently foreclosure reform and state eminent domain legislation. These protections impose high social costs and encourage regressive income redistribution. Political momentum for home-protective legislation derives in part from the notion, trumpeted by scholars, legislators, judges, and special interests, that residential real estate is a psychologically vital form of property. (23) This ideology has cloaked protectionism in the rhetoric of home and encouraged a self-perpetuating cycle of legal intervention.
A. Overproduction of Home-Protective Legislation
The goal of this Section is to illustrate the panoply of protections grafted on to American property, bankruptcy, and tax law. (24) These laws enable, or at least increase the likelihood, that an owner can retain her residential real estate despite creditor claims, government eminent domain action, or market fluctuations. Some of these protections, such as homestead exemptions, date back to the agrarian economies of earlier eras when loss of home meant loss of livelihood. Their persistence in property law underscores the influence of rent seeking. Other home-protective laws are modern-day innovations. Piece by legislative piece, we have created a regime of what I term residential protectionism, where homeownership receives greater, categorical protection than ownership of other real property and personal property. (25)
If home is man's castle, then it is a veritable fortress for debtors. (26) Homestead exemptions, tenancy by the entirety, and foreclosure-relief legislation help owners to shield a portion of their personal wealth from creditors and to retain their homes. State homestead exemptions offer creditor protection by exempting some or all of the equity in a personal residence. (27) Five states and the District of Columbia offer unlimited homestead exemptions; (28) in the remainder of states the homestead exemption ranges from a few thousand dollars in Arkansas to a half million in Massachusetts. (29) In many states, married couples can shield property (frequently the marital residence) from the creditors of one spouse by holding the property as tenants by the entirety. (30) In one-third of the states recognizing tenancy by the entirety, the protection applies only to real estate, (31) and in some states, such as Illinois, it is limited to the family home. (32) On the federal level, the recent Housing and Economic Recovery Act requires mortgage lenders to forgive debt above 90 percent of the appraised value of owner-occupied residential real estate so that homeowners can refinance into FHA-insured mortgages. (33)
Law also extracts rents for owners and housing industry interests through tax benefits. Tax breaks for homeowners include reductions in the assessed value of residential homes, credits, deductions, exemptions, and ceilings on annual property tax increases. The federal home mortgage interest and property tax deductions provide generous benefits to taxpayers who itemize their deductions. (34) At the state level, California's infamous Proposition 13 limits property tax increases to two percent per year until the house is sold, (35) and the "Save Our Homes" amendment to the Florida Constitution caps property tax increases at the lesser of the annual change in the consumer price index or 3 percent. (36) Homebuyers also reap benefits. For example, George Bush's "ownership society" campaign pledged a host of programs to increase the number of homeowners. (37) More recently, in the wake of the subprime mortgage meltdown, new federal legislation provides a first-time buyer tax credit of up to $7,500, which is repayable over fifteen years interest free. (38)
The impulse of property law to protect and privilege the home has only grown stronger since the recent Supreme Court eminent domain case, Kelo v. City of New London, (39) incited public outcry. Kelo addressed the question of whether the city of New London's condemnation of residential homes for a private redevelopment project met the Fifth Amendment public use requirement. Justice O'Connor's now famous statement that "any single-family home ... might be razed to make way for an apartment building, or any church .... might be replaced with a retail store" found its mark with the American public. (40) A flurry of state enactments ensued. (41) California amended its constitution to prohibit state and local governments from "acquiring by eminent domain an owner-occupied residence for the purpose of conveying it to a private person" for economic redevelopment unless the eminent domain was necessary for public health and safety reasons. (42) Indiana mandated compensation at 150 percent of fair-market value for condemnation of an owner-occupied residence. (43) Nineteen states adopted legislation that shields the iconic middle-class, single-family home by limiting eminent domain for private redevelopment or urban renewal to "blighted" areas. (44) Despite the fact that residential takings are a small minority of condemnations, (45) they elicit an impassioned response and are at the heart of calls for strong private property protection.
The array of home protections in property, tax, and bankruptcy law has proven costly. These laws encourage overinvestment in residential real estate, disproportionately burden lower-income households, raise the cost of credit, and frustrate land planning and controlled growth. William Fischel has described how "homevoters" demand local land use laws that protect and benefit their undiversified investments in their homes. (46) A similar dynamic affects state and federal home-protective legislation, with homeowners--joined by business interests--aggressively lobbying for protections against the market, the government, and homeowners' own debts. (47) States in turn embrace home-protective or home-privileging legislation to attract wealthy residents and enhance the state's tax base. (48)
Home-protective laws misallocate resources by encouraging excessive investment in residential real estate. Surveys show enormous public enthusiasm for home buying and widespread awareness of tax benefits and favorable lending policies (49)--an exuberance that is often irrational. (50) Legal authors routinely claim that the home deserves protection as an owner's largest asset; (51) yet it is likely that the home is an owner's largest asset because of legislation that protects and privileges residential property. This overinvestment occurs at the expense of diversified investments in the equity and bond markets and investments in education and human capital. (52) Protective legislation and government home buying assistance convey the message that housing is an optimal, low-risk investment. Economists are quick to note this misconception. Paul Krugman contends that the home is a high-risk, undiversified asset that is in essence borrowed on margin. (53) In the legal scholarship, Rashmi Dyal-Chand challenges the efficacy of homeownership for wealth accumulation. (54)
Not only does residential protectionism encourage excessive investment in residential real estate, it does so at the expense of lower-income households. The federal tax deduction on mortgage interest, the nation's third largest tax expenditure at a cost of over seventy-two billion annually, (55) provides larger subsidies to higher-income owners who itemize deductions. (56) State laws capping property taxes until resale benefit owners at the expense of new buyers--often first-time buyers and young families. (57) These distributional issues might be less severe if tax benefits were fully capitalized into higher home prices, but the research indicates that the tax benefit is only partially capitalized. (58)
Home-protective laws also distort credit markets and increase the cost of credit. Residents of states with unlimited homestead exemptions pay higher interest rates and are at increased risk of credit denial compared to residents of states with lower exemptions. (59) Poor families are the most severely affected by the increased cost of credit and denial of credit, despite their inability to take advantage of unlimited exemptions. (60) At the other end of the economic spectrum, protections may invite fraud and abuse by elites. (61) O.J. Simpson evaded the $33.4 million civil judgment against him for his ex-wife's death by purchasing a mansion in Florida, and Ken Lay, Enron's former CEO, diverted his assets to his multi-million dollar Houston penthouse. (62) The homestead provisions of the 2005 Bankruptcy Act now limit this behavior by creating a $136,875 cap for fliers who have committed a felony that indicates that filing was an abuse of the bankruptcy process, when the debt arises from violation of federal securities law, or in other specified instances of wrongdoing. (63)
On the local level, residential protectionism slows mobility and frustrates land planning. Some protectionist legislation, such as property tax freezes for owners with tax reassessment upon resale, skews mobility. Owners relocate at lower than optimal levels for employment markets (64) as well as in response to changed family and housing needs. At the community level, constraints on mobility hinder the "Tiebout model," where municipalities compete to attract residents by providing favorable levels of taxes and services. (65) Municipalities are less likely to compete to efficient outcomes because owners are reluctant to "vote with their feet" and relocate. Other forms of home-protective legislation impede community development and land planning. (66) For example, state legislation restricting eminent domain to blighted areas constrains economic development. These laws may drive governments to situate public projects farther from economic centers, where land is cheaper and more readily acquired--regardless of the potential value of the project to a metropolitan area or the effects on sprawl.
B. The Legal Mythology of Home
The pervasiveness and variety of home protection in U.S. property law suggests that the law reflects (and encourages) a special ethos with respect to the home. The attribution of personal and social values to the home dates back to the nineteenth-century Romantic philosophy of the home as a paradise on earth and a refuge from the corruption and danger of urban life. (67) The legal privileging of homes in the United States, however, did not begin in earnest until the New Deal's "modernized social compact" introduced government buyouts of defaulted mortgages, attractive direct lending programs, and lengthier mortgage amortization periods. (68) Political rhetoric and business advertising broadcast visions of the "American dream," "home as castle," and "home is where the heart is." These ideological campaigns were disseminated most effectively by those with a financial interest in a robust housing market, such as banks, developers, and real estate companies. The marketing of the home as a powerful symbol, coupled with financial incentives, channeled wealth investment to residential real estate and encouraged attitudes glorifying homeownership. (69)
A generation later, the concept of the home morphed from social recovery to personal self-development with Margaret Radin's theory of property for personhood. (70) This legal theory of home spins a captivating tale of how the moral force of law safeguards the personal and psychological values of the home. The "personhood" character of one's home has become a tenet of property law, cited ubiquitously and accepted without challenge. Legal scholars, joined by legislators and judges, are the modern narrators of this myth.
Radin constructed personhood theory on the basis of moral philosophy, including Hegel's Philosophy of Right. She argued that certain kinds of property are so "bound up with the holder" that they are necessary for "self- constitution" and human flourishing. (71) Personhood theory spans a continuum from fungible property, which is freely traded or held for trade, and personhood property, the loss of which "causes pain that cannot be relieved by the object's replacement." (72) To achieve proper self-development, an individual needs control over resources in the external environment, particularly those objects that fall on the personhood end of the property continuum. (73) Radin did not clarify whether her theory addresses the ability to be a person or the same person, to be a self or the same self, to be a self as defined by the person or a self as constructed by society, or to have a personality in either the psychological sense or the philosophical conception of personality. (74)
Building on her thought-provoking, if amorphous, theory, Radin argued that enhanced...
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