Real property law is largely about managing the bundle of rights and responsibilities traditionally attached to land ownership. This page unpacks that bundle, exploring the possibility for agreements and organizations that allow us to share and more wisely manage those rights and responsibilities. This page is not specifically about sharing housing and land; rather, it is about how shared use arrangements, shared financing, shared management, and other cooperative arrangements can help us to establish economically sustainable ways of managing land and housing ourselves.
Each of us needs to have a secure relationship with land, because we all require a place to physically exist, to be sheltered, to make a livelihood, and to be nourished by land’s resources. Our goals are generally straightforward: To build legal relationships and legal frameworks to ensure that everyone and everything alive will be nourished by their relationships with land, and that future generations will be, too. I said the goal was straightforward; I didn’t say it was modest.
Whether by necessity, by choice, or by inspiration, most of us will soon have to make new and different choices about how we house ourselves and how we use land. As this happens, we will need to create innovative agreements and organizations that will govern our new relationships with land.
- 1 Unpacking the Bundle of Rights
- 2 When Land is Not Shared
- 3 Solutions Addressed Here
- 4 Our Common Goals
- 5 That Bundle is Toooo Large, This Bundle is Toooo Small
- 6 Sharing Space
- 7 Sharing Management
- 8 Sharing Financing
Unpacking the Bundle of Rights
Ownership of land is generally thought to come with a “bundle of rights,” such as the right to possess and occupy the land, the right to build on it, the right to use its resources, the right to set terms for the transfer of land, and the right to decide how it is used, by whom, and for how much money. Those rights, however, are tempered in two primary ways:
- Private “laws”: Private individuals and groups can make agreements to set limitations and directives on how land is used, transferred, and so on. These limitations typically come in the form of covenants that run with the land, equitable servitudes, lease agreements, co-ownership agreements, and other contracts and rules that are enforced by homeowners associations, co-owners, neighbors, mortgage holders, landlords, tenants, and easement holders.
- Public laws: There are local, state, and federal laws that place limits on what we do with land. These include land use laws, environmental protection laws, inclusionary housing laws, rent control laws, regulations on the subdivision of land, regulations on the powers of homeowners associations, taxation of property, anti-discrimination laws, and so on.
What we must do, then, is two-fold:
- Create Private Agreements and Organizations: We must choose from the large number of tools for the private management of land rights and responsibilities and structure them to meet our needs. This work entails drafting covenants and contracts, choosing entities, structuring organizations, choosing tax statuses, structuring relationships between entities and individuals, and much more. The options vary from state to state, and the choices must be made while weighing a wide variety of factors, such as our goals and needs, sources of financing, limitations imposed by lenders, tax implications of the arrangement, and limitations imposed by public laws.
- Navigate Public Laws: The legal relationships that people wish to create for the management of land are often limited by laws that dictate how such relationships may be created and how land can be used. These laws are particularly awkward to apply to our systems that involve shared use, shared management, and/or shared financing of land. It conjures up a theme reiterated throughout this website: our projects fall squarely within legal grey areas. For example, it is difficult to apply landlord/tenant laws to situations where the landlord is the tenant, such as in a housing cooperative. It is awkward to apply laws that govern transactions between a developer and homebuyer when the homebuyer is the developer, such as in many cohousing communities. Furthermore, land use laws that have sought to prevent the mixing of residential, commercial, industrial, and agricultural uses prove awkward when we wish to bring production back to our neighborhoods, such as by forming a residential community that engages in collective food production activities.
Because of the multitude of ways to manage private land rights and the variety of public laws affecting our relationships with land, trying to innovate on land and housing requires learning a lot about real estate law. This chapter is not a full overview of the knowledge and skills required, but it provides a framework for thinking about the unique tools used and challenges faced by those of us working on housing and land use in the sharing economy.
Creating more economically and ecologically sustainable relationships with land should perhaps not be a goal, but rather an imperative. It’s not simply due to the fact that we must begin the future with a severely degraded planetary ecosystem. We also face a crisis in housing. Landless people’s movements throughout the world are vocalizing the essential unfairness of the fact that so many people must struggle to simply secure a place to physically exist, much less make a livelihood, on the planet. The struggle is not confined to the poor. Middle-income people in the U.S. are floundering to determine how their current housing arrangements will be financially sustainable into the future. The burden of housing ourselves is heavy and the currently available options are limiting.
Sharing and the lack of sharing have an interesting effect on the whole situation. When land is shared, it becomes more valuable to the cause of securing the long term sustainability of our economy and building the wealth of our communities. When land is not shared, land prices rise and land becomes more “valuable” in a speculative marketplace. The latter is an incentive hard for most individuals to resist, at least not without a more attractive alternative.
In this way, the speculative marketplace drives most of society’s decisions about land and housing. Rather than simply regard our home as a home, we also treat it as a speculative investment. We strive to buy in a buyers’ market and sell in a sellers’ market, and to maximize short-term monetary gains. People that own land benefit from scarcities of affordable land, because the market value of their own land rises. With their profits, they can acquire larger or additional properties, which exacerbates scarcity. Most homeowners are advised to play this speculative game. The winners of the game tend to keep winning, and this game-like marketplace begins to feel far too reminiscent of Monopoly.
Land and housing resources have also been made artificially scarce because we have parceled them into ever larger and more expensive single-family boxes. The average size of the American home has more than doubled since the 1950s. 1 Individual families take on increasingly heavy burdens when they purchase and maintain large properties. Widespread foreclosure crises have now demonstrated to us that such burden were not within the means of many households. We now have an incredible number of housing units that sit empty and provide for no one, while other parcels of land are over-exploited and degraded, and millions of people lack homes. The fragmentation of land and the failure to implement systems of sharing have resulted in what Columbia law professor Michael Heller has referred to as a simultaneous tragedy of the commons and tragedy of the anti-commons. 2 In sum, the entire situation pleads urgently for solutions.
Solutions Addressed Here
This website explores some solutions, along with some legal tools for implementing them. The solutions described here are of a particular kind and focus. They are:
- Solutions Applicable to Every Person: The solutions that most interest us are ones that can be implemented by individuals and groups, rather than by government programs or large scale developers. In that respect, I intend this website to be relevant to the land needs of every person, since we also believe that it is the economic choices of every person that will ultimately reshape our economy.
- Solutions Possible within the Current Legal Framework: The solutions described here are mostly possible within the current legal framework; they are not solutions that must wait for laws to change. Truthfully, great strides would be made if local, state, and federal governments were to make new rules about how we own, manage, use, and transfer land. We should all advocate for changes to our laws, but we must not rely on changes that may or may not happen as soon as we need them to. In the meantime, the agreements and organizations we form with each other will change how we own, manage, use, and transfer land. That, alone, will have a huge impact, and will eventually influence the legal framework.
- Solutions Focused on Economic Sustainability: The solutions described here focus largely on the economic sustainability of our relationships with land, and not so much on the ecological sustainability, although the two are, of course, interdependent. Economic motivations are at the root of our tendencies to exploit ecosystems; exhausted ecosystems are fueling our growing economic desperation. Financial concerns are also at the forefront of people’s minds at a time when economies are crumbling. The relationships and organizations we form in a sharing economy can address the root economic concerns. Our new relationships and organizations will be aimed at removing incentives to exploit and ensuring that every human feels a sense of economic security and material abundance.
- Solutions Focused on Housing: The solutions here look primarily at models for management of the land where we live – i.e., how we house ourselves – and less at the how we manage land for the purposes of agriculture, open space, commercial and industrial use, and so on. Housing is the primary way in which every person develops a legal relationship with land – generally either as an owner or as a renter. Housing also makes up the largest part of each person’s interaction with the economy. In 2010, housing made up 34% of the average consumer’s expenditures. 3 All told, housing is a big deal and a huge piece of the economic puzzle.
In sum, the primary focus of the housing and land use section of this site is to be immediately relevant to every human being – the need find an economically sustainable housing solution for oneself.
Our Common Goals
While we do have a near infinite variety of needs and goals there are some common goals that we all tend to share:
To be More than Just a Renter
Society generally offers us two options for obtaining our housing – we own or we rent. Another way to put it is that we either assume a large bundle of rights and responsibilities, including the right to benefit from equity in the property (owning), or we assume a small sack of rights and responsibilities (renting). This two-option system contributes to society’s overall economic divide, in the sense that it creates a class of landlords that are positioned to continually grow their land holdings. As land becomes more concentrated into the hands of few, the owners have decreased connection and accountability to the lands that they own. Decisions that absentee landlords make tend to be driven more by the desire for a financial return than by a desire to care for land or make it a wonderful place to live. This system, therefore, does not tend to build in incentives that contribute to the long term economic and ecological sustainability of land. Resident ownership, or, at the very least, resident control, aligns the interest of those in charge with the residents, creating a greater chance of land stewardship and investment in the community. Clients will increasingly look for solutions that fall in between renting and owning, since assuming the full burden of ownership is not going to be affordable or ideal for many, for some of the reasons stated further below.
To Avoid Stressful Financial Burdens
Most people aspire to find housing that will not create a stressful financial burden. Another way of saying this is: people want housing they can afford and it is after all, what everyone is looking for, no matter their income levels. For the purposes of this website, affordable simply means that we can access it without a stressful financial burden.
To Avoid Inflexible, Long-Term Debt
People are increasingly looking for ways to finance land purchases without taking out large bank mortgages. Committing to a 30-year mortgage means committing to 30 years of a stable and predictable income, which is something that none of us can rely on in times of rapid economic change. And fear of foreclosure is what prevents many people from quitting bad jobs and creating healthier and more rewarding livelihoods. Long term loans can also be expensive: most home purchases are financed by bank loans which, taking into account the accumulation of interest over the life of the loan, adds an enormous premium onto the cost of the home. Finally, the large bank financing machine, as it stands now, is intricately and dangerously tied to the health of our economy. Relying on bank mortgages to provide our home financing means relying on banks to secure our society’s future economic stability. There is a growing consensus on this: it doesn’t work.
To Live in Housing that Facilitates Local Economy, Sharing, and Sustainability
Social and economic isolation are another byproduct of subdividing our land into so many single-family boxes. In the latter half of the 20th century, each household in the U.S. became increasingly pressured to take on, alone, the burden of all aspects of household sustenance, including food, goods, and services. We got by this way, in large part through unsustainable short-cuts like TV dinners, packaged foods, and cheap, disposable consumer goods. Now, we, as a society, cannot afford that disposable lifestyle. Our imperative is to reduce material resource use, reduce waste, reduce energy use, reduce water use, reduce the amount of space we take up, and localize production. And the growing consensus is: it’s too hard to do this alone. We need to cooperate and share, and the physical arrangement of our housing will make a huge difference in our ability to do this. Thus, many people have begun to picture themselves in housing arrangements that, to varying degrees, entail shared spaces in addition to private spaces.
To Foster a Non-Speculative Housing System
More and more, people are seeing themselves in the bigger picture of our housing market, and do not want to contribute to its long-term unsustainability. A person of means could easily choose the common option of buying a property of his/her own, but doing so does not remove their property from the speculative game, as the property may one day go back onto the market. Many people, therefore, are increasingly looking for mechanisms that remove properties from the speculative game, and place it into a system of management and governance that ensure that it will benefit the long-term housing and land needs of the community. We are thus interested in legal structures that limit equity, and/or that put land into ownership by entities like nonprofit land trusts.
To Foster a Thriving Ecosystem
The rights to extract resources, mine, deforest, and develop land are generally packaged within the bundle of rights that come with land ownership, and those rights are tempered primarily by land use and environmental laws that have sadly fallen short in protecting our ecosystems. Ownership of land, unfortunately, comes with a small bundle of responsibilities, relative to the size of its bundle of rights. As a result many people seek legal structures that create privately-imposed limits on the exercise of rights to extract resources and develop land. They may even seek to create affirmative responsibilities to steward and regenerate damaged land. This may entail conservation easements, obtaining approval for developments that incorporate open space preservation, nonprofit ownership or stewardship, and other mechanisms for preserving land and regenerating ecosystems.
That Bundle is Toooo Large, This Bundle is Toooo Small
Society typically gives us two options for housing ourselves: 1) we own our home and assume the large bundle of rights associated with ownership, or 2) we rent our home, and assume a very small bundle of rights, the primary of which is the right to occupy it. The bundle that is “juuust right” and that meets the our goals likely falls somewhere in between the large and small bundles of rights.
Our relationship with land in a sharing economy therefore looks like this: We allocate important rights to individuals, while allocating other key rights to cooperatives, nonprofits, and other group-managed and community-managed entities. There is nothing new about this model. “Common-interest developments” (CIDs), also called “Common-interest communities,” do exactly that. A condo community allocates some rights of ownership to individuals, while allocating other rights and common property management to a condo owners’ association. We can therefore draw on many of the legal frameworks developed in CID law, but taking the shared property and community-managed elements to new levels.
Importantly, putting more rights into the hands of groups means putting more responsibilities into the hands of groups, thereby relieving some of the burdens that previously made ownership inaccessible and unaffordable to many people. The responsibility for financing purchases and the responsibility of maintaining land and buildings, for example, can be shared.
We will address three primary things that can be shared in relation to real estate:
- the use of physical spaces,
- the management and control of how properties are used, maintained, and transferred, and
- the capitalization of land purchases.
Any group of people can choose to share some or all of these things to varying degrees, depending on the goals of their housing arrangement.
The housing solution that many people are beginning to envision for themselves can be summed up as follows: more humble abodes in combination with more robust shared spaces. Home is where we engage in many activities, including sleeping, cooking, bathing, recreation, lounging, and socializing. There is no reason why all of those functions must be crammed into every single-family home. In fact, if we had access to shared social gathering spaces, shared recreation spaces, shared lounges, shared outdoor areas, and so on, each of us could probably be content to live in a more simple dwelling unit. There is already a movement of tiny house dwellers – people living in 100-300 square foot dwellings. However, such tiny homes will not likely be a viable solution for most people unless they are clustered in communities where people also share additional living spaces and amenities.
The degree of space sharing will vary, and one way of envisioning the different models of space sharing is to break it down as follows:
- Intentional villages/neighborhoods: Housing units are intentionally clustered around some shared amenities, such as roads, parking, outdoor areas, recreational facilities, and/or renewable energy facilities. The word “village” may sound misleading, since such intentional “villages” can be as small as two units, as many duplexes and other small multiplexes are essentially designed for this kind of sharing.
- Cohousing: Smaller housing units are clustered in combination with a significant amount of shared space and amenities that supplement the intentionally small size of units. This usually includes a large social/recreational space, a commercial scale kitchen where residents gather and share meals, and common outdoor areas.
- Shared homes: Multiple individuals or households share a legal unit, such as a large home. In contrast to the cohousing or village model, each household does not necessarily have its own legal unit including a kitchen and bathroom.
Note that the degree of space sharing will shape, but not necessarily dictate, how much day-to-day cooperation and sharing take place among the individuals. Each of the configurations described above could involve households that are largely independent from each other, or they could entail a significant amount of community activity, depending on the choice of residents. In communities with higher degrees of community activity, a sharing lawyer, in addition to creating the legal framework for property rights, may also help shape the agreements or organizational structure under which the community activities take place.
Whether or not physical spaces are shared, groups may choose to share management of certain property rights and responsibilities. Homeowners associations (HOAs) are an example of a shared management structure to which individual homeowners submit themselves when they purchase a home in a planned community.
When communities manage property rights collectively, a somewhat different mindset guides decisions – one that focuses on the longer-term health, comfort, viability, and/or sustainability of the entire community, rather than on benefits to individual homeowners. HOAs can, for example, prohibit a homeowner from drilling an oil well in his front yard, since such a well could detract from the charm and design scheme of the neighborhood. HOAs have become widespread because of the recognition that the benefits conferred by community management often outweigh the costs (monthly dues) and inconveniences of being part of an HOA.
While community management can be used for the well-being of communities, the structure and goals of HOAs do not necessarily strike the balance needed for more sustainable communities. HOAs tend to provoke a certain amount of eye-rolling among people that have dealt with them, because they have often been known to protect speculative investments, rather than fostering community. For example, HOAs have been known to prohibit homeowners from installing drought-tolerant landscapes or vegetable gardens instead of grass, installing solar panels that obscure charming Spanish-style roofs, or other activities the HOAs perceive to diminish the property values in the neighborhood. State laws have even had to intervene on behalf of homeowners, limiting the authority of HOAs to make rules against public policy, 4 and also limiting the authority of HOAs to make decisions, raise assessments, or use enforcement liens without due process. 5
HOAs can and should be used to promote sustainable communities. The structures we create to share management of land and housing in a more sustainable economy should factor in needs beyond that of maintaining property market values. Whether rights are allocated to a homeowners’ association, condo owners association, cooperative, land trust, or simply to a group of co-owners, such associations may, more and more, be charged with goals that include promoting economic and ecological sustainability, cultivating a sense of community and sharing, and/or preserving affordability. A key right that is increasingly being handed over to group management is the right to control how a property is sold, to whom, and for how much. 6 Partially removing this right from the control of individuals means that a community can better decide how a property interacts in the larger marketplace, and, to some extent, removes it from full play in the game of Monopoly.
The governance structure of management entities will play a key role in its accountability. For example, most community land trusts are governed by a board of directors, one third of which is comprised of people that live in the trust’s housing units. This structure ensures that residents have a strong voice in decisions, but also ensures that residents cannot make controlling decisions that prioritize their financial gain over the provision of long-term affordable housing in a community.
Please see our Financing page.
- Adler, Margot. “Behind the Ever-Expanding American Dream House,” NPR, July 4, 2006, available at http://www.npr.org/templates/story/story.php?storyId=5525283 ↩
- “The danger with fragmentation is that it may operate as a one-way ratchet: Because of high transaction costs, strategic behaviors, and cognitive biases, people may ﬁnd it easier to divide property than to recombine it. If too many people gain rights to use or exclude, then bargaining among owners may break down. With too many owners of property fragments, resources become prone to waste either through over use in a commons or underuse in an anti-commons.” Heller, M. A. “The boundaries of private property.” Yale Law Journal, 108, at 1165–1166 (1999). ↩
- Bureau of Labor Statistics Economic News Release: Consumer Expenditures – 2010. Released September 27, 2011, available at http://www.bls.gov/news.release/cesan.nr0.htm. ↩
- See California’s AB 1061, passed in 2009. ↩
- See the Uniform Planned Community Act, the Uniform Condo Act, and state laws such as California’s Davis-Stirling Act. ↩
- Limited equity housing is an example of a model that removes an individual’s right to set the terms of sale for their housing unit. ↩