Exploring the Relationship Between Land Use Right Restrictions and Wealth Inequality.

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Coex, Seoul

Abstract
In order for a city to express its “soul” through built form, a framework must exist where real people, with real passions and real desires, are able to give direction to urban space and structure. The reality however in most cities throughout the world is that it is not the passion and energy of committed individuals (be they Architects, developers or investors) that drive the shape and form of the city. We observe rather that increasingly form is given to buildings and the spaces they frame by an anonymous set of bureaucratic procedures, codes and planning controls.
We live in a time where much of the world is emerging into greater and greater freedom. This culture of freedom permeated the US hippy movement of the sixties, South Africa’s “Freedom Struggle” of the eighties and the Arab Spring in the earlier parts of this decade. In spite of news headlines that speak of a minority reactionary backlash, the general tendency is towards freedom to choose one’s religion, sexual orientation and vocation.
It seems contradictory therefore that during this time of widespread personal freedom, we have witnessed a global tendency toward increasing state control over what individuals may and may not build on land that they own. The work of Architects, more than ever, is an almost impossible task of navigating land use rights, permits and compliances. The physical act of building too is constrained by state imposed controls instigated by career bureaucrats and “technical experts” under the guise of “Health and Safety”. While the sustained attack on the Architect’s freedom to guide the building process is to be understood as part of a global tendency toward bloated self-serving civil service, desperate to claim increasing power as an end in itself, we argue here that this should not be allowed to continue on its current trajectory without exposure to the spotlight of academic scrutiny.
While this paper will contextualise itself within the global tendency away from freedom in the built environment, it will focus specifically on impact of land use rights and building controls on wealth inequality in South Africa. The paper explores the possibility of establishing a methodology that can reliably measure whether the building and land use controls currently in place represent a “nett cost” or a “nett benefit” to economy, the environment and to the community and especially to wealth inequality.
Keywords: Wealth Inequality, Freedom, Building Codes, Local Government, African City, Land Use rights, Planning Control
1. Introduction
It has become widely understood that wealth inequality is a significant threat to stability and sustainability. Even in advanced economies like the US the reality is that the 10% that make up the wealthiest part of the population own 76% of the country’s assets. The French economist Thomas Piketty argues that “extremely high levels” of wealth inequality are “incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies” and that “the risk of a drift towards oligarchy is real and gives little reason for optimism.” Piketty, T, and Ganser, L. J. (2014)
The basic premise of Piketty’s argument is those whose livelihoods depend on labour (blue and white collar) tend over time to have to work harder and harder to maintain their status quo. By contrast those that own assets tend to become wealthier and wealthier. More significantly to the architects reading this paper is that we know from an analysis of Piketty’s data by Matthew Rognile, an American scholar, that in fact the growth in wealth among those who own assets can largely be ascribed to real estate assets and not to equities. Rognlie, M. (2016)
Since at very least the time of Marx and Engels, scholars and politicians have discussed, formulated and proposed a broad range of solutions to wealth inequality and motivated their work as an attempt to respond to a threat to global order. Most recently Thomas Picketty has proposed a progressive wealth tax as an essential component to any economy aiming for stability. Piketty, T, and Ganser, L. J. (2014)
Picketty’s “wealth tax” falls into the category of strategies that the state can employ through coercing the citizenry into doing what they would otherwise not choose to do. It is understood that scholars and politicians would resort to proposing coercion in the absence of any other seemingly workable macro solutions. This paper will therefore begin to explore the possible effectiveness of “micro” solutions born out of industry specific knowledge gained through years of professional practice. It will explore the detail as it applies to the real estate and construction sectors and to the Architect’s profession. This paper will not seek to add complexity to existing strategies to address wealth inequality. It will not propose new legislation or regulations that serve to further coerce or constrain private individuals. This paper explores rather the potential impact of simplifying the approach toward land use rights and building controls with the aim of initiating a discussion around the relationship between land use right restrictions and wealth inequality.
Corresponding Author: Tim Hewitt-Coleman
PO Box 12956
Centrahil
Port Elizabeth
6006
Phone: +27 415822753
Email: tim@noharchitects.co.za

 
2. Defining land use controls
In Port Elizabeth, where I have lived and practiced as an architect for the last twenty five years, owning a piece of land does not necessarily mean that you are free to use this land as you please. While you are free to sell the land or generate and income through rental, the manner in which you use the building and the manner in which permanent changes and improvements are made are restricted by a range of land use right restrictions and building controls. While controls and restrictions may vary, the following schedule of controls and restrictions would apply to a sample site in Port Elizabeth.
table
 In addition to these controls more specific by-laws are developed from time to time to limit specific uses including keeping animals, accommodating paying guests or accommodating students.
3. How do land use right restrictions impact on wealth inequality?
It may not be immediately obvious that restrictions on land use rights as expressed in zoning schemes, building regulations and other “compliance measures” are not in the public interest. When they are discussed at all, they are defended as necessary devices to avoid urban chaos and mayhem. The scientific evidence however for this supposed chaos and mayhem is very thin. We have reviewed the National Environmental Management Act, National Heritage Resources Management Act, National Building Regulations Act, Port Elizabeth Zoning Scheme, The Nelson Mandela Bay Guest House Policy and the South African National Department of Transport Parking Standards. Not one of these documents quote any case study or any scholarly work that predicts the chaos and urban mayhem that would emerge should these restrictions on personal freedom not be imposed.What is clear and beyond discussion or dispute is that land use controls have the very powerful effect of entrenching the status quo. Any attempt to change the status quo is met with complicated compliance hurdles that need to be overcome. So while being defended as necessary devises to maintain urban order, land use right restrictions serve to maintain and the status quo of the built form making it difficult for new entrants in to the market. Since, as it can be seen from Rognlie’s work, much wealth accumulation actually arises from the ownership of real estate Rognlie, M. (2016), any attempt to maintain an urban form status quo, must simultaneously be understood to be an attempt to maintain (if inadvertently) a wealth inequality status qou.
Those individuals attempting for the first time to build wealth through real estate are confronted with a set of building regulations that are very difficult to comply with when working in such a way as to best mobilise sweat equity. Building materials that are freely available, such as those required for wattle and daub wall construction or round pole roof construction for example, are not permitted by the national building regulations. While South Africa has a rich and varied pre-colonial architectural tradition, Frescura, F. (1981) traditional building skills have also been lost (partly as a result of the imposition of building regulations making the application of these
traditional skills illegal). The net effect of the imposition of building controls historically in South Africa has been to outlaw traditional building methods, bringing to an abrupt end the evolution of building materials and methods that comes with societies that urbanise organically outside of the context of colonialism. This evolution of building technique from rural to urban circumstance is evident throughout Europe, India and China but largely absent in societies that have been colonised. While this may appear to be a subject of importance perhaps only to architectural historians, the loss of a tradition of building to meet a families’ housing needs, has had a significant impact on wealth creation over passing generations. Those new entrants into the market, who do manage to acquire a structure compliant with the National Building Regulations, find themselves limited in a number of ways. They very often may not build on the full extent of their site (limited by coverage and bulk factors). Their attempts to increase their wealth by adding value to the property are limited by these controls. They are very often limited in the uses they may put their property to. Their ability to grow their wealth by adding revenue generating actives to their land is severely curtailed. The height to which they are able to build is very often limited, once again limiting the value that could have been added and thus the wealth growth opportunities.
Because of a pattern of restriction on land use rights over the years, the understanding that changing the status quo is very complicated and time consuming has become common among landowners. The impact of this “common knowledge” is to dissuade land owners from ever attempting to build wealth through expanding their own properties. This results in either spending on non-investment grade consumer items or in allocating resources toward poorly performing listed assets or derivatives thereof marketed by the financial planning industry. The available research on the impact of land use rights on wealth inequality is sparse or only indirectly relevant. The research however on the impact of the tendency of land use rights to dissuade landowners from consider changing the status quo is completely absent from scholarly literature. This is not surprising as it is of course very difficult to develop a methodology to quantify that which did not happen or that would have happened. Taleb, N. N. (2007). So while the points above illustrate the mechanisms that serve to limit the ability of new entrants and small land owners to fully exploit the wealth generation potential of their land, wealth inequality does not arise out of this phenomenon only by virtue of it being very complicated to close the wealth gap from the bottom up but also because those investors in the economy that already have significant wealth are able to negotiate the hurdles of land use right restrictions to release value and thus increase their wealth. In the case of land and land use rights it is certainly a pattern of the rich get richer, not only because the rich are able to purchase real estate in greater quantities, but because “the rich” are able to afford, the lawyers, town planners, environmental consultants, architects, engineers and heritage practitioners required to unlock the value in investment land. This is evidenced by the fact that by far the significant majority of new retail space, new office space and new industrial space in cities like Port Elizabeth results not from the small private land owners transforming their properties to meet these needs, but results rather from the work of big capital acquiring land and (at great expense) changing its rights to accommodate significant new investment.
4. What can be done?
In South Africa, as in many other parts of the world, land use rights and building controls are entrenched at many levels of government. To remove or modify them will prove to be a very complicated task requiring significant resources and determination. But before there can be any hope of progress in this regard, the important work that needs to be done is to develop a comprehensive “cost benefit analysis” of the barrage of land use right and building controls that are current and applicable. This paper postulates the hypothesis that land use right restrictions and building controls in their current form serve to not only perpetuate wealth inequality in South Africa, but in fact aid in the increasing the gap between the rich and the poor.
5. Disruption
The economy of Port Elizabeth, South Africa and the world, has been characterised since its establishment by a series of “disruptions”. A disruption can best be described as an innovation that creates new markets and radical transforms and industry or even an entire economy. Seba, T. (2014). Perhaps the first major disruption the Port Elizabeth region experienced was the introduction of an agricultural economy introduced by Nguni speaking
people migrating slowly from the north along the east coast of Africa. Beef, dairy and crop growing technologies combined with a whole range of implements possible with iron smelting technology, completely overwhelmed the pre-existing hunter gatherer economic model. Mostert, N. (1992) Evidence suggests that hunter gatherer economy that had existed for tens of thousands of years was completely disrupted and replaced with in a relative “blink of an eye”. Since that disruption there have been continuous waves of disruption characterised by among others, shipping and navigation, gun powder, telecommunications (since the telegraph), railways, the internal combustion engine, Air transportation, the internet and smart phones. Disruptions are very difficult to predict. Taleb, N. N. (2007) This fact is true even for the most well-resourced corporations in the world including those corporations who are highly specialised in the sector of the economy in which the disruption is about to occur. In 1985 AT and T famously predicted that the US demand for mobile phones would be no more than 900 000 by 2000. The actual figure was in fact will over 100 million. Seba, T. (2014) Governments have an even worse record at anticipating disruptions than do corporations. When we return to our focus on land use rights, we see that in places like Port Elizabeth where we find that restrictions on land use rights, have the potential to significantly impair and slow a region’s ability to take up new demand that may emanate from a future disruption.
This is especially significant in economies, like South Africa, that are attempting to transform existing and entrenched patterns of wealth distribution. This is true because one of the few things that we do know about disruptions is that they generally tend to not favour those already entrenched in the sector or the economy. AT and T was not the major beneficiary of the disruption caused by mobile phones in the US, the existing taxi industry was not the major beneficiary of disruption caused by Uber and horse breeders were not the major beneficiary of the disruption caused by the steam engines.
Transformation in patterns of wealth distribution is of course complicated and all encompassing, but where transformation touches land use rights, it is clear that we need to act firstly to remove land use right restrictions that are standing in the way of current and future disruptions. Presenly, technologies like Air B and B are disrupting the short stay rental economy, but the Local Authority has on its books a “Guest House Policy” that would cause law abiding citizens to think twice before taking advantage of the sometimes significant revenue streams that would be accessed by making use of the simple, free disruptive technology.
Uber and its competitors have begun to disrupt the pattern of private motor vehicle ownership. One of the consequences is a dramatic reduction in demand for parking space at for example shopping centres or theatres. Henao, A. (2017) We know that government takes a long time to react. It takes a lot of effort to remove a regulation or a statute, the real fear therefore is that in spite of a disruption enabling a much greater percentage of the investment on each retail site being invested in retail space, that this will not happen very soon because of the length of time it takes for processes to pass through government. It is because of our poor track record in anticipating disruptions and governments poor record in in reacting quickly that we argue that the options under consideration must include the complete removal of land use right restrictions and building controls.
It is anticipated that there will be significant resistance and intransigence toward any campaigning for the removal of land use right restrictions and building controls. It is also anticipated that it will not be enough to popularise and analyse studies that point to the many success stories of cities with little or no planning.
A possible route to consider is that of the court system, where the attempt would be to show that land use right restrictions and building controls are an infringement on personal freedom that cannot be justified by any scientific evidence of harm that would be caused if this personal freedom were not infringed upon. While this route remains a possibility, what is required to precede such action, is a clear and defensible methodology to illustrate the beneficial economic impact of the removal or relaxation of land use restrictions and building controls. The route therefore proposed to test the hypothesis put forward in this paper, is the development of a computer model that is able to test the impact of relaxing or removing land use right restrictions and building
controls in the context of a functioning urban economy. It is proposed that we use data from the city of Port Elizabeth in the Nelson Mandela Bay Municipality to develop and test this model.
This type of modelling has been used with varying success for years to model demand for public and private transport. Sophisticated modelling packages have been able to test impact of various road building projects on trip times and other quantifiable measurable that enable policy makers and public executives to make decisions regarding the allocation of funds to public works projects. What we propose is the development of similar city wide modelling software that is able to deliver clear physical, spatial and economic measurables resulting from the manipulation of land use right restrictions. The economic measurables we propose though should include, overall economic impact, impact on job creation, impact on wealth creation, impact on wealth inequality. Because of the number of variable involved it is anticipated that the computing power required of a model of this nature would be significant. The timing of this proposed model may therefore be especially appropriate given the continued rapid grown in computing power with machines now rapidly nearing human intelligence in some complex fields and already outstripping human performance in a number of less complex tasks.
6. Conclusion
Understanding land use rights and their impact on the potential of land to express its full development potential, is a highly technical field. Many architects through years of practice and working up against these land use right restrictions have become acutely aware of the impact that these controls have. In South Africa there exists a group of professionals that call themselves “Town Planners”. These professionals, in the South African context, are experts in the processes involved in changing land use rights from one form into another. Due to the amount of time that Town Planners spend dealing with the technical aspects relating to land use rights, they are well placed to articulate themselves on the subject. The fact however that the town planning profession relies for its income on Land Use rights existing (in as complex a form as possible), makes it less likely that voices will emerge from this profession that will honestly and critically reflect on the negative impact that land use right controls may have on society.
This being the case, Architects, as a group of professionals seem the most likely group to take up the cause of activism in this regard. This paper therefore reaches out to Architects to criticise and guide the activism and research that may be triggered by ideas contained herein. Feedback from this paper will guide the next step to be taken either by the author of this paper or by other individuals that may emerge as a result of the discourse that flows from it.
References

 

Frescura, F. (1981). Rural shelter in Southern Africa. Ravan press,

Henao, A. (2017) “Impacts of Ridesourcing-Lyft and Uber-on Transportation Including VMT, Mode Replacement, Parking, and Travel Behavior.”

May, J, and Juby G. (1998) “Poverty and inequality in South Africa.” Indicator South Africa 15

Mostert, N. (1992) “Frontiers: the epic of South Africa’s creation and the tragedy of the Xhosa people.” Taleb, N. N. (2007). The Black Swan: The impact of the highly improbable (Vol. 2). Random house.
Piketty, T, and L. J. Ganser. (2014) “Capital in the twenty-first century.”

Rognlie, M. (2016) “Deciphering the fall and rise in the net capital share: accumulation or scarcity?.” Brookings papers on economic activity 2015.

Seba, T. (2014) “Clean disruption of energy and transportation.” Milton Keynes

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Author: buildingfreedomtoday

The World can be a better place.... But how? Taking the debate beyond the political, beyond the theoretical into the real economy, into the physical and spatial dimension where cities, landscapes and livelihoods take form.

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