The Homevoter Hypothesis
I have been meaning to read this book for a while, as I bought it from a used bookstore in Dartmouth, NH.
It happens that the author is a retired Dartmouth College professor of economics.
In order to help me process such a dense non-fiction book, I took raw notes (maybe too many) as I read it. Enjoy!
Preface
The author previously wrote about how “local governments use their land-use controls…to maximize the value of owner-occupied housing in their community” (The Economics of Zoning Laws, 1985).
He emphasizes the economic interests of residential voters as the best way to understand zoning.
He’s also previously wrote about the role of courts in refereeing property rights of private land owners vs. public ownership that zoning implicitly confers on the rest of the community. (Regulatory Takings, 1995)
The author notes that local govevernments have too much power over land and that courts should be mindful of preventing local governments from “transferring too many property rights from the private to the public sector, making zoning unfairly and inefficiently restrictive”.
The author has previously received criticism that he focuses too much on local government (as opposed to state or national), and that he engages in “localism bashing”.
While it is true that “suburbs” demonstrate unfairness toward those who are not homeowners, why single out local government?
This book is a defense of that criticism, and why the “political economy” of local government differs from the state or nation.
Chapter 1
An Asset-Market Approach to Local Government
“The important facts are that home values are the largest part often of most people’s assets, and public events like taxes and spending affect the value of that asset.”
“The uninsurable riskiness of homeownership explains why homeowners dominate local politics.”
“Historically, owners of business property were the major players in local politics, but since about 1920, homeowners have become the dominant group of property owners.”
“…Economists…have traditionally seen [the property tax] as a regressive tax on housing or as yet another burden on capital formation…Taxpayer surveys find that it is the least palatable tax to pay, and its use has been gradually supplanted by state taxes for much of the twentieth century.”
Author’s note: property taxes are more painful than income taxes because income taxes are withheld vs. paid out-of-pocket.
Should public K-12 education be funded by local, state or national? Because the public benefits of education quality accrue to a much wider geographic area than local—courts have forced school funding to be less local on the basis of equity, where the democratic process has not approved that shift.
“Most reformers believe that the insular zoning of modern suburbs can only be overcome by having higher governments make them accept their “fairer share” of low-income housing and other unpopular land uses.”
Author believes (shares the fact) that “local government provides public services with less economic waste than others.” Undoing local control harms government efficiency, which is bad.
Local education funded schools perform better than when funded more regionally—this is independent of whether the education system is administered locally or not. Studies have found that when courts prohibit local funding of schools, school performance objectively suffers.
Environmentally, economists fear that local control of zoning leads to “race to bottom” in attracting commerce & job taxable base—but the opposite is true, a “race to the top”. Author argues that risk-averse homeowners are the champions of this, and that there’s a game theory situation of neighboring communities collaborating together to uphold environmentalism.
It’s also important to recognize that land use is a critical reason for local government formation in the first place.
“The homevoter hypothesis holds that homeowners, who are the most numerous and politically influential group within most localities, are guided by their concern for the value of their homes to make political decisions that are more efficient than those that would be made at a higher level of government. Homeowners are acutely aware that local amenities, public services, and taxes affect (“are capitalized in”) the value of the single largest asset they own. As a result, they pay much closer attention to such policies at the local level than they would at the state or national level…they will tend to choose those policies that preserve or increase the value of their homes.”
“Two-thirds of all homes are owner occupied”
1990: “median housing equity is more than 11 times as large as median liquid assets among all homeowners”—this ratio is inversely correlated with age, but average senior still holds majority of assets in home equity.
Despite US global corporate equity value eclipsing aggregate US real estate market value, this wealth appreciation is concentrated and has left the median homevoter still highly concentrated in their home equity. They do not really “own” much else, beyond their home.
Understanding & predicting local government behavior is best when viewed “through the eyes of the homeowner.”
Author’s thesis (stated the most concisely): “Concern for home values is the central motivator of local government behavior”
Impact fees are not like any other kind of a tax—because they are payments for permission that can be withheld (in the event of non-payment).
“For most local governments, the property tax is their largest single source of discretionary funds”
NIMBYism makes sense if there is no way to insure against neighborhood or community-wide decline. “Since residents cannot insure against neighborhood change, zoning offers a kind of second-best institution. If homeowners were insured against neighborhood decline, they wouldn’t worry so much about unlikely scenarios and behave like NIMBYs.”
Why do people buy homes, given this risk?
It’s because capital gains of home value appreciation are basically untaxed.
No other asset is untaxed in this way.
Anecdotally, renters do not exhibit NIMBYism as much as homeowners.
Neither do landowners of rental property, probably because they have diversified their risk in ways that homeowners cannot, e.g. by syndication and real estate investment trusts.
From the author’s personal experience on a zoning board, he feels confident explaining land-use advocacy & school board advocacy & other local gov participation.
He observes newest entrant homeowners seem even more averse to change than long-term homeowners, and that this anecdotal behavior is economically motivated.
The author also share a criticism he receives s tell him he ignores other land-use interests besides homeowners, e.g. developers.
The “municipal corporation” was an American invention of the early 1800s (Eric Monkkonen (1988; 1995))
From the 1800s to now, motor vehicles and changing labor market created “commuting”—homevoters vote in their home jurisdiction, not their place of employment. These were the same in the 1800s, and led to pro-growth mindset. In the 1800s, the rich walked to work while the poor commuted from separate municipality. In the 1900s, that switched (rich commute, poor walk).
“Urban politics is above all the politics of land use” Paul Peterson’s City Limits (1981)
A right-to-develop has been put on hold since 1926 Euclid v. Ambler Supreme Court decision, affirming zoning.
Chapter 2
Local Government’s Corporate Form
Cities are more like business corporations than states.
They are recognized as immortal, as legal persons.
Their charters permit them to make contracts, own property, and hold liability for tort and breach of contract.
The mayor-council vs. council-manager model of municipal governance.
Municipal reform since the 1910s led to popularity of the latter, modeled after a professional CEO managing a business corporation.
The “municipal corporation” was invented by Massachusetts judges in the 1800s to distinguish from English “borough corporations” which were not as democratically governed as townships in the fledgling American democracy.
Tocqueville in Democracy in America wrote that Europe evolved by first forming nations which then dictated top-down chartering/establishment of more local forms of government.
In the US, it was the exact opposite: counties formed after townships, states formed after counties, and the national union formed after states.
Cities can add/annex territory, consolidate.
New York, Philadelphia and San Francisco are examples, aided by state decisions that added county lands to the cities’ territory.
Municipal corporations seldom go bankrupt, and restructuring is less strict than business corporation bankruptcy.
“Shareholders” in municipal corporations (homeowners) are way more activist and have more reason to be than business shareholders.
Critically, voting rights of municipal corporations are very important.
Unlike business corporations, municipal corporations have never(?) been more than one vote per resident.
More residents have been enfranchised over time (e.g. renters, women).
Author speculates that business corporations transitioned to dollar-vote rule because shareholders no longer feared majoritarian risks as the marketplace for business equity matured and became more liquid. This afforded business shareholders opportunities to diversify, where homevoters have not gained this ability to diversify.
Chapter 3
Capitalization, Zoning, and the Tiebout Hypothesis
Tiebout Hypothesis: residents vote with their feet, choosing communities that offer their preferred bundle of public services.
The author adds that a condition of this hypothesis being true is that homevoters are able to perceive the effect of local governance on their home’s value (“capitalization”).
Property taxes and public amenities are demonstrated to affect home prices, demonstrating that residents vote with their feet (and wealth).
Critically important point:
Zoning (prohibitions on increasing supply) are a pre-condition for public amenities contributing to home price.
If zoning does not exist then buyers cannot justify bidding higher for real estate in a comparativey better school district because it is anticipated that the market will react to pricing and produce more supply until the school district is no longer relatively “better”.
A local government will not be able to persuade most shareholders (i.e. homevoters) to agree to higher taxes unless it is coupled with the condition that new housing supply (i.e. immigration) is capped/prohibited.
Zoning is that pre-condition (prohibition on new supply, new residents).
The author shares a few reasons that state powers are not used in the fashion that local land use powers are—perhaps most important is that states are prohibited by the Constitution from restricting immigration from other states.
Local government powers of zoning have been challenged before in court as restricting “freedom to travel”, but this argument has lost in federal appeals court (Construction Industry Association v. City of Petaluma, 1975).
Most interesting case law on zoning is from a series of Mount Laurel, NJ court cases.
Plaintiffs argued that cities do not have zoning powers, as land use operated to exclude low and moderate income persons from obtaining housing in the municipality is unconstitutional.
This challenge to zoning was overruled by Supreme Court and by popular state amendment in NJ.
The 2nd of 3 pre-conditions for the Tiebout Hypothesis is that residents can shop for other communities that offer a variety of amenities.
This has been studied at length, and there is some level of “diversity” in choice of municipality though this depends on how strictly you look at the elasticity of the job market.
The chapter laid out the evidence that Tiebout’s model is reality.
Chapter 4
The Median Voter in Local Government Politics
This chapter is about how municipal corporations act as “deliberate, value-maximizing agents of homeowners” and how median voters control local government.
It also touches on how homeowners enter a highly illiquid, risky asset which prevents them from “voting with their feet”, as much as the Tiebout Model suggests that homeowners are capable of.
Homeowners identify that they must protect & grow their home equity by involving themselves in local governance, because the alternative is ruinous (due to mortgage leverage).
Tiebout’s model left out how communities (municipal corporations) are profit-maximizing and not just competing for survival.
Even ignoring profit-maximizing behavior, city management is held highly accountable because homeowners (“municipal shareholders”) see the product of city services every day (e.g. in road quality).
Until introducing zoning into Tiebout’s model, critics said that Tiebout was not accounting for the poor continuously “chasing” the rich–both groups voting with their feet.
Zoning puts that chase to a halt, by prohibiting new entrants to a community.
4.6: Homeowners Rule (And Renters Do Not)
4.7: Rent Control is Rare Because of Homneowners
4.8: Proposition 13 Promoted Rent Control
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Chapter 5
Serrano and the Tax Revolt
5.1 Serrano Divorced Local Property Taxes From Schools
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5.9 Serrano Explains the Vote Swing from 1972 to 1978
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Chapter 6
The Fruits of School-Finance Centralization
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6.11 No-Kids-in-School Voters Are a Majority
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Chapter 7
The Race to the Top in Environmental Protection
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Chapter 8
“Beggar Thy Neighbor” and Landfill Location
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Chapter 9
How Homevoters Remade Metropolitan Areas
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Chapter 10
Sprawl, Metropolitanism, and Local Control
10.1 Sprawl Is Caused by Homevoter Anxieties
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10.2 Sprawl Is Not Caused by Speculation or Subsidies
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10.18 High Housing Prices Retard Employment Growth
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Chapter 11
Reforming and Reaffirming Local Government
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11.4 Getting NIMBYs to Accept LULUs
LULU = “locally unwanted land use”
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11.5 Home-Value Insurance Would Assuage NIMBYs
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11.9 “Carrots” to Promote Community Development
Two:
- Side payments by developers - exactions & impact fees
- Home-value insurance - author’s main proposal
11.10 Public-School Supplements, Not Vouchers
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11.11 “Sticks” to Discourage Local Misbehavior
- Higher government pressures - “shaming” penalty for suburbs that flout state-wide goals
- Substantive due process - Pennsylvania courts have struck down exclusionary suburban zoning (minimum lot sizes), seem to hover at a minimum lot size of one acre.
11.12 The Takings Stick Is Still Necessary
Reviewing court case law that rejects local government over-reach in “taking” property rights (nebulous)
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I haven’t finished reading & taking notes onthe book.
This page will get updated as I do (last updated Nov 13, 2025)