2005/05/12 - Gabriel Calzada - La Ilustración Liberal

Gallardon-grad

I don’t know if everyone is clear on Mr. Gallardón´s idea. Changing the zoning laws means that some people who have a home today, might not have one tomorrow thanks to our right honorable Mayor and his personal, collectivist vision of how to raise the quality of urban life. We are talking about confiscation, expropriation, robbery or seizure.

According to the Spanish daily El Mundo´s Housing section, Madrid Mayor Alberto Ruiz-Gallardón plans to reduce the number of city blocks zoned for building in areas affected by his Redevelopment Plan. The reason is almost as totalitarian as the proposal: City Hall thinks it will improve the city and benefit its citizens.

I don’t know if everyone is clear on Mr. Gallardón´s idea. Changing the zoning laws means that some people who have a home today, might not have one tomorrow thanks to our right honorable Mayor and his personal, collectivist vision of how to raise the quality of urban life. We are talking about confiscation, expropriation, robbery or seizure. I leave it up to the reader to choose the most appropriate noun because if we let City Hall describe his actions, I won’t be surprised if it uses the same terms an interior decorator spouts to describe his latest masterpiece.

I guess the brains behind the plan would say they don’t intend on taking anybody’s house and that, just the opposite, they will pay anyone affected by the aesthetic reforms the market value of the expropriated buildings first and the demolished ones second. But this leads to an interesting question: how are they planning on financing such a costly reduction in zoned building areas? Almost certainly pouring gasoline on the Gallardonian flame, I mean, by going further into debt. Everyone knows Mr. Gallardón has no qualms about getting his fellow citizens into greater debt by acquiring commitments in our name and I do not believe this time will be an exception.  

However, this problem is miniscule when compared to others the Mayor, as a result of his simple interventionism, has not thought twice about. There is no way the budget office can pay the true market value of citizens´ expropriated homes. The reason is quite straightforward and is rooted in the economic theory of value. Given that value is always subjective, the price of a heterogeneous good like a home depends on both the seller and the buyer’s negotiating skill and the subjective value each one assigns to the good. The market price of a home like those Madrid City Hall is considering expropriating can only be known once a sales agreement is reached in the market, which is precisely what makes the expropriation plan impracticable. The only way to pay a market –or fair– price for these homes is trying to buy them from their owners. But, of course, then the plan would be left up to whether citizens really want to have the zoning laws reduced, an intolerable turn of events for Mr. Gallardón. And I say this in part because even if City Hall bought the homes from their owners, it would be doing so with money it had previously fleeced from them through taxes –money its owners I doubt would have used in the same way.

If the total lack of respect for private property and the imposition of Gallardon’s fantasy city continue to guide government action, we will have to end up changing the city’s name to Gallardon-grad. Little by little.