News Story

Do We Really Own Property or Just Rent it From the Government?

Property rights are guaranteed in both the U.S. and Michigan Constitutions. Most rights of a free people emanate from private property rights. Our founders came to America to escape the tyranny and feudalism in Europe — they recognized that a people could not be free without constitutional guarantees protecting private property. Unfortunately, private property rights in the United States have been steadily eroding during the last century. The loss of private property rights has been incremental but continual. Many property owners are astonished to discover how few rights they have left when they attempt to develop their land.

Taxation and regulation are the two main culprits in the loss of property rights. Property taxes in Michigan, even after the passage of Proposal A, remain a burden for many homeowners. Property owners in the state work hard and save for many years to pay off their mortgages, only to discover that they still have to pay high tax bills just to keep their homes. A strong case can be made that property owners do not own their property but instead rent it from the government.

Arguably, property taxes are the most destructive type of tax to freedom: Income taxes are mostly based on work activity and sales taxes are tied to discretionary purchases, but property taxes are levied based only on ownership and never go away.

And after the direct taxes, property owners are subjected to federal, state and local government regulations. Federal wetland and endangered species regulations often have a profound impact on the value and use of private property. Land owners who have wetlands on their property often find that they are curtailed from developing portions of their property even though they are required to pay taxes on the entire parcel. Courts have generally ruled that unless virtually 100 percent of the value of the property is lost due to government restrictions, the owner is entitled to no compensation.

State regulations that have the most impact on private property rights often involve regulations that implement federal and state environmental laws or licensing requirements. Licensing requirements often hit small businesses especially hard with extensive requirements dictating how they can conduct their business. These often lead to extensive time delays and high costs to deal with the red tape. A developer of fast food restaurants informed me that it cost him on average $160,000 more to develop a restaurant in Michigan than in Indiana, due to state and local government red tape.

The most pervasive government restrictions affecting private property are local ordinances and zoning restrictions. While some reasonable zoning requirements can protect a property owner's use and enjoyment of their property, it is evident that local governments in many cases have gone way beyond what is reasonable in their regulation of private property. It is one thing for local governments to impose restrictions on a nuisance issue such as noise or a safety issue such as traffic flow, but it is something else when government dictates how private property can be used or developed when — at times — it is done just to satisfy the whims of local officials.

These restrictions can be both extreme and ridiculous. While dining at a fast food restaurant in Okemos, Mich., my wife and I decided to enjoy the nice summer weather and eat outside. However, there was only one table and it was occupied. I queried the manager as to why they had not provided more than one table when there was adequate room for several. His reply: Meridian Township would not let them put in more than one outside table.

The Meridian Township example may seem like regulatory overkill, but unfortunately it is not uncommon. Seldom does a week go by when I do not receive a contact from a property owner somewhere in Michigan who relays an example of excessive restriction placed on the use of their property by local government.

Michigan needs stronger private property protections. These would limit by legal definition the ability of local and state government to unduly restrict the use of private property. In states such as Oregon, Ohio and Arizona, voters have taken it upon themselves through ballot drives to seize back some of their property rights. This direct action may soon be necessary in Michigan if legislators cannot muster the political will to address the problem.

The original version of this story was posted online on June 12, 2010.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.