NIMBY insurance

Ryan Avent’s latest brainstorm: NIMBY insurance.

It would go something like this:

I’d love to collect tiny premiums from residents looking at potential development near their homes, in exchange for which I’d take responsibility for the change in value of their home relative to homes outside of the directly affected area. If their property does poorly relative to other homes, then I’d shell out for the difference, either at an agreed upon time after development or upon sale. If it does better, well, the gain would accrue to me.

A city that was confident that it was developing well could even offer this kind of service at a deep discount relative to what the private market would likely ask. It might help combat knee-jerk opposition to development plans, and since NIMBYs seem, to me, to be bad at gauging the effect of development on their property values, it would be a nice source of revenue. And of course, if the government ended up being totally wrong, homeowners would be protected.

The Austin Contrarian, however, sees a moral-hazard issue:

New developments can pose risks to property values, although homeowners do indeed systematically overestimate these risks. But lots of other things affect property values as well — rising crime, deteriorating appearance (trash, graffiti), deteriorating school quality. (Childless households have an incentive to worry about school quality because it affects their property values, too.) Some neighbors have tended vacant, foreclosed homes out of a concern for their own property values. Insuring homeowners against the impact of new developments would give them less incentive to worry about the impact of other variables under their control. It would be impossible to separate these other influences from the impact of development.

And I’m concerned about how you’d correlate the change in value of homes thus insured with the change in value of homes in the putative control group: no neighborhood exists in a vacuum, so it’s difficult to assert that Home A is seriously affected by Development X while Home B isn’t, unless they’re far enough apart that the comparisons might not be valid anyway.

Still, the idea has a certain twisted appeal, especially to those who feel victimized by NIMBYs and their cousins the BANANAs.

1 comment

  1. fillyjonk »

    6 March 2009 · 7:21 am

    We’d kind of have to be careful who we let collect/offer NIMBY insurance, though. I could see developers – even ones with no intention of building in an area – coming through and “shaking down” residents, using some patter like.

    “”Dis is an awful nice neighborhood youse got here…It would be a cryin’ shame if somethin’ was to HAPPEN to it.”

    (OK, so I’m not so good at reproducing B-movie mobster-speak).

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