North Carolina chooses cronyism over property rights and the environment

The right to enjoy your property free of interference by your neighbors is a core property right. Under legal principles that have endured for centuries, anyone who interferes with your ability to enjoy your property, what’s known as nuisance, must stop and pay you damages for the violation of your rights.

Seal_of_North_Carolina.svgNorth Carolina has decided to reject this core principle, to benefit a politically powerful industry. Last week, it enacted House Bill 467, which has a boringly long name but should be known simply as the “Crony Nuisance Protection Act.” Now, any agricultural or forestry business can violate its neighbors’ property rights and the best the neighbor can hope for is to be paid the “fair market value” of their property. This is cronyism, pure and simple, that robs property owners near favored businesses for no other reason than that the latter are politically influential.

Last week, the governor vetoed the bill, explaining that it violates property rights and threatens significant environmental harm.

“Special protection for one industry opens the door to weakening our nuisance laws in other areas, which can allow real harm to homeowners, the environment and everyday North Carolinians,” [Governor] Cooper said.

Undeterred, the legislature overrode the veto. In addition to capping any relief for nuisances caused by this favored industry, the Crony Nuisance Protection Act establishes that bringing a successful nuisance claim against one of these businesses can result in it being open season on your property rights by it and any other member of the industry.

If the nuisance is a permanent nuisance, compensatory damages shall be measured by the reduction in the fair market value of the plaintiff’s property caused by the nuisance, but not to exceed the fair market value of the property. . . . If any plaintiff or plaintiff’s successor in interest brings a subsequent private nuisance action against any agricultural or forestry operation, the combined recovery from all such actions shall not exceed the fair market value of his or her property. This limitation applies regardless of whether the subsequent action or actions were brought against a different defendant than the preceding action or actions.

In other words, once you’ve been compensated “fair market value” for a nuisance by someone, everyone else can impose nuisances on you with impunity.

If you’re not familiar with the concept of “fair market value,” this may seem like no big deal. After all, aren’t the victims of these nuisances being adequately compensated? That’s certainly how the law’s supporters have tried to sell it.

But fair market value is a deceptive phrase; it is not an adequate measure of the damage done to property owners. Instead, it’s the amount that the government must pay you if it takes your property through eminent domain.

There is a thick body of literature on how inadequate this is. For one thing, the reason why you own your property rather than someone else is that you value it more than its fair market value. If you didn’t, you’d sell it to someone who does.

This is particularly true for people’s homes. We put incredible value on our homes, the memories they hold, and countless other personal considerations that do not show up in fair market value. That’s why people spend an incredible amount of time, energy, and money fighting eminent domain abuse—it’s not a good deal for the people whose property is taken from them. I suspect that the businesses supporting this law would sing a completely different tune about fair market value if the tables were turned and their farms were targeted by eminent domain.

North Carolina’s Crony Nuisance Protection Act is not just an assault on private property rights, it also threatens the environment. Nuisance law is the key property-rights-based protection against environmental harm. It’s what protects you from your neighbor polluting your property without your consent.

For that reason, nuisance law is an effective means to prevent pollution that causes more harm than benefits. If a business would only get $5 of benefit from polluting your property, it’s not going to do it if it knows that it’ll have to pay you for $50 in harm. However, if the benefit of the pollution greatly exceeds the harm to your property, the business will be willing to pay you for the harm it imposes. Secure property rights protections reveal the costs and benefits of most pollution better than any other alternative.

The Crony Nuisance Protection Act destroys that price signal. A hog farm could build a huge, smelly facility right next to your house and wouldn’t have to pay you anything, if you’d already been paid for another nuisance. That’s true even if the benefit to the hog farm of placing the smelly facility there is minimal and the impacts to your family are huge. The nuisance system would encourage the hog farm to place the facility where it will do the least harm, not where it can best avoid having to compensate for the harm.

I can sympathize with farmers—especially small family farmers—who face many difficult challenges, including excessive regulations. But those challenges are no excuse for attacking their neighbors and destroying vital property rights.

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