All urban neighborhoods have rules. The garbage cans, for instance, in our neighborhood must be kept inside a garage or behind an enclosure of a certain dimension. The can might always sit on the private lot, even while down by the curb on collection day. Yet the city residence at some point gathered up in the city council chambers and voted that garbage bins are unsightly and hence violate the public enjoyment of our streets.
Although property rights secure ownership of the home and plantings and outbuildings, the neighborhood considers the outer appearance of the street as a shared good. And hence feels it reasonable to set some guidelines for those who don’t pick up on the nuances of social norms. To be sure these vary from place to place throughout a metro area. Some cities are fine with RV’s in the drive, while others do not permit extra cars in the drive and require garage doors closed while not in use.
Changing times present changing issues. The advent of Air B&B led to concerns around properties being used for entertaining instead of everyday life. Although the use of the short-term rental property is just for the structure, the noise and traffic that come along with vacationers is a negative externality to the neighbors. They are interfering with the public space shared amongst the group. And that is how it ends up on the city council persons’ agenda.
So how about the other way around? If a neighbor uses private resources to do a project which has positive externalities, is it reasonable for them to knock on the door across the street and ask for some equity payback, for having increased the value of the neighborhood? Can they say, “See the lovely $70K custom landscape job, with perennials bordering a gorgeous paver driveway and the welcoming front patio? I just increased your home value, so get your checkbook out and give me a little of that extra equity you’ve got tucked away in your house value.”
The error in the thinking here is in categorizing the goods as public or private. The activity which was done (hiring a designer, picking out the plan, hiring a landscape firm) was achieved for private purposes. The activity did not touch the neighbors’ private goods, like damaging a basement through flooding or perhaps taking down a tree that was right on the lot line. These landscaping transactions are in the moment and fungible.
Improving the facade of your home and thus elevating the ambiance on the road also directly impacts the neighbors (in the same way that a burnt out, boarded up house has a negative impact). This is a public impact. With public goods, you don’t see the cash until you exit the group. The stock of all the public goods tied to the neighborhood may go up and down through the ownership time period- but it is only upon leaving the group that a dollar figure is recorded on these non-fungible values.
Noticing the different mechanisms is a keyway to identify whether a good is public or private.
The reasons why a homeowner would over improve their property knowing that they pay the tab and others will benefit through externalities are important to understand, especially in policy recommendations. The net result of one improvement is generally a cascading effect of others. When people enjoying what they see across the way, they tweak their own property as it pleases them. Sometimes a little seed money from a city can be a catalyst to get the ball rolling.
These are the borderlands where publics and privates get negotiated. In city council meetings and across back fences. There is no one recipe. A reactive, amicable and consistent system of governance seems key.
Home Economics 