The NIMBY Buyout Plan (Essay Contest Winner)
How turning land-use vetoes into tradable rights can solve the housing crisis.
Nathan Smith is a PhD economist, writer, and public administrator who frequently discusses economics, society, and culture. He has a Substack blog and is also the author of Principles of a Free Society (2010).
In this essay, which placed first in our Essay Contest, Nathan argues that housing is expensive because land-use rules have turned property rights into an opaque, non-tradable tangle — blocking the Coasean bargaining that could reconcile externalities without central planning — and proposes “Coase-ification”: a federal Land Rights Map, state Homeowners’ Bills of Rights, and local pilots that make development vetoes explicit and tradable so growth can proceed by buying out opposition rather than fighting endless political battles.
Why has housing become so expensive? Why does it take years to secure permission to build a few homes, when cities once expanded street by street? Why does every new apartment building become a political battleground? Why have major infrastructure rollouts become rare, with broadband standing as the difficult exception that proves the rule? What reforms could unlock a 21st-century version of the rapid, ongoing transformation that once reshaped the American built environment?
The answer lies in the insights of Nobel laureate Ronald Coase. In his landmark 1960 paper, The Problem of Social Cost, Coase explained how to reconcile market failure with market efficiency. He recognized that externalities are real—especially in land use, where one person’s choices can affect the value, enjoyment, or safety of others’ property. Zoning and other land-use controls arose as political solutions to these problems, but they substitute centralized, bureaucratic decision-making for decentralized bargaining. Coase argued instead for defining these externalities as rights and rendering them transparent and tradable, so that markets—not administrative discretion—can reconcile competing interests. Rather than bulldozing opposition to development, the Coasean approach is to buy it out.
Yet rather than adopting that logic, modern governments have layered a dense thicket of administrative rules atop the built environment. Property rights have become increasingly unintelligible as regulations accumulate. Zoning codes, utility easements, setback rules, wetlands protections, and myriad environmental and design standards form a fog of overlapping permissions and prohibitions. In that fog, no one can see very far. Firms stay small because navigating the system requires hyper-local expertise rather than scalable competence.1 Regulations do have beneficiaries—neighbors shielded from noise, or citizens protected by environmental standards—but these protections are bundled, implicit, and non-negotiable. They operate as a kind of dysfunctional paternalism: people hold valuable interests without knowing it, cannot trade them, and cannot adapt them to circumstances. The result is a property system that suppresses innovation, prevents efficient compromise, and blocks the kind of growth we once took for granted.
Zoning solves a real problem by prescribing where residential, commercial, and industrial land use will occur, mitigating certain negative externalities, such as industrial eyesores blighting the view from residential front porches, or busy shopfront traffic becoming a nuisance to a quiet neighborhood. But it does so in a way that creates new problems, and ultimately that cure is worse than the disease. Zoning is a form of central planning, and it has held American cities back for the same reasons that the Soviet Union lost the Cold War. Central planning bureaucracies are less clever, nimble, and creative than markets are. This is where Coase’s insight shines, because if only property rights could be defined in more nuanced ways, to include protections against negative externalities, and then rendered tradable, then externalities can be tamed without losing market nimbleness. Economists have long recognized this as in theory the best way to fix the market failure.
Yet for decades, despite the great success of Coase’s paper in the ivory tower– Coase (1960) has long been the most cited paper in the social sciences, and a “Coase Theorem” has been derived from his work and taught in economics classes– Coasean schemes of tradable property rights in externalities have largely been treated as utopian where the built environment is concerned. Coase himself keenly appreciated the problem of transactions costs, and treated his insights more as a theoretical construct than a practical program.
But modern computing, the internet, AI, and geospatial data have altered the frontier of the possible. Comprehensive “Coase-ification” of land use rights, as a fix for the stagnation of the built environment, is no longer a prohibitively difficult informational problem.
My proposal is a three-step roadmap:
Federal: Create a Land Rights Map to reveal the full structure of property rights nationwide. Such a federal map could build on existing academic efforts such as the Wharton Residential Land Use Regulatory Index, the Zoning Atlas and a 2023 national mapping effort by Gupta et al.2, but federal government resources would yield a more robust and sustainable map.
State: Enact state-level Homeowners’ Bills of Rights that clarify the default freedoms of landownership and sunset unrecorded restrictions.
Local: Encourage tradability in property externalities through pilot projects with federal incentives.
Together, these steps would partially “Coase-ify” land use, replacing bureaucratic opacity with market clarity, and empowering communities to reconcile growth, fairness, and freedom through transparent exchange rather than remain stuck in political stalemate.
For “NIMBYs,” who want development to happen but “not in my backyard,” Coase-ification would function as a buyout plan. The system would recognize a lot of rights to block development, but would make them tradable. Many former NIMBYs would make a tidy bundle selling off their rights to block development. Then, when the way is cleared for infill, they might find they liked it, or if not, they could use their profits to move.
I. The Problem: Complexity Without Clarity
Early American landownership was simple. To own land was to control its use, bounded only by nuisance law and basic rights of neighbors. That simplicity was a huge economic advantage: it allowed fast settlement, flexible adaptation, and a fluid market in opportunity.
Modern prosperity, however, has multiplied the interdependencies of land. Three broad forces have layered new complexity atop the old principle of simple landownership:
Urban externalities. In dense communities, one person’s land use inevitably affects others’ enjoyment and safety. A pleasant garden, a noisy workshop, a tall building, or a traffic-drawing business all impose externalities. The web of local ordinances meant to manage these externalities—zoning codes, setback rules, parking requirements—has grown immense and unintuitive.
Infrastructure dependence. Modern life relies on networked utilities—electricity, water, broadband, roads, mail, and soon, if all goes well, new networks like delivery drone corridors or driverless-vehicle grids. Property value depends on being plugged into these systems, which creates rights and obligations that extend far beyond any individual parcel.
Environmental stewardship. Since the 1960s, society has rightly added layers of protection for air, water, and wildlife. Yet these protections further entangle property rights. Land is now simultaneously a private asset, a node in public networks, and a vessel of ecological duties.
Each of these changes has real benefits. But the opacity of the system—the absence of a single transparent registry of what rights and restrictions actually exist—creates paralysis. Developers and homeowners must navigate thousands of pages of local ordinances and discretionary reviews. Regulators themselves often lack visibility into overlapping jurisdictions. Novel projects, which don’t fit existing categories, are presumed guilty until proven permissible.
Our property system has become too complex and opaque to leave room for the permissionless innovation that is the fount of progress. The economic creativity that Coase described—the spontaneous bargaining that solves problems—cannot happen because it’s too hard to figure out who holds what rights, and many of them aren’t tradable anyway. Coase-ification would illuminate that structure and unleash markets to improve it.
II. Federalism as Framework
Land use has always been governed locally, but housing scarcity is a national concern. The U.S. Constitution divides responsibility neatly but imperfectly: municipalities control zoning under state authority, while the federal government can shape incentives through funding and information. That balance makes the federal government the best catalyst for Coase-ification: it can build the informational infrastructure and create incentives for reform without dictating outcomes. The legal changes that drive most of the impact will need to occur at the state and local levels, but federal changes can supply the framework.
A rough analogy for this kind of “cooperative federalism” is the Broadband Equity, Access, and Deployment (BEAD) program, launched by the Infrastructure Act of 2021, which is on track to solve most broadband coverage gaps. The federal government set a national goal—universal broadband—and provided mapping, standards, and grants, while states designed local solutions. Coase-ification could follow a similar model: a national mapping initiative state-level codification of rights, and local experimentation with tradability.
III. Step One: The Federal Land Rights Map
The first step is purely informational. The federal government, ideally through HUD, should create a National Land Rights Map: a comprehensive, publicly accessible database of property rights and restrictions.
The Map would synthesize existing data sources—county parcel records, state zoning databases, environmental overlays, utility service territories, floodplain and habitat maps—into a unified, standardized, queryable interface. Resembling the FCC’s National Broadband Map, it would display who can do what, where, under which rules.
At first, the Map would be explicitly non-regulatory: a research and transparency project. It would not override local law but would compile and cross-reference it. Citizens could use it to see, for example, that their property is zoned single-family, lies within a wetlands buffer, and is entitled to electric and broadband service under specific regulatory regimes. Developers could compare jurisdictions and identify opportunities for infill or reform. Policymakers could quantify how many parcels are legally eligible for new housing, and how many are not.
Crucially, the Map should also attempt to infer who benefits and who bears burdens from each restriction. If a rule prohibits chickens in backyards, the affected neighbors are the presumed beneficiaries. If an easement guarantees access for a utility, the utility and its customers are the beneficiaries. Identifying these relationships transforms anonymous red tape into a network of accountable rights and duties, the precondition for eventual bargaining.
AI tools could make such a map practical for the first time. Modern language models can parse zoning codes and environmental ordinances, extract constraints, and align them spatially. Geospatial data standards like GeoJSON and open-source platforms like QGIS make integration feasible. The result would be an evolving digital twin of America’s land-use regime: legible, searchable, improvable.
Once created, the Land Rights Map would exert quiet but powerful pressure. Like the broadband map, it would quickly become a focal point for debate. Localities would discover inconsistencies; homeowners would question anomalies; state governments would see patterns of exclusion. Transparency is not neutral. Often, information is power, and many land uses would be unlocked by mere ease of discovery that they are already allowed. But transparency also creates demand for reform.
IV. Step Two: State Homeowners’ Bills of Rights
As transparency grows, the next step is clarification and standardization. States should adopt Homeowners’ Bills of Rights: clear statements of what property owners can presumptively do unless an explicit, duly recorded exception applies.
A Homeowners’ Bill of Rights would function as a default constitution for land use. It might include, and elaborate on, rights such as:
The right to build or expand one or more homes.
The right to operate businesses.
The right to grow food.
Localities would then be tasked with explicitly registering and codifying exceptions—zoning, historic districts, setbacks, environmental protections—in a standardized digital format compatible with the Land Rights Map. Unregistered restrictions would sunset after a grace period, perhaps five years.
This step transforms zoning from a patchwork of invisible constraints into an explicit catalogue of exceptions to a known baseline of rights. It rewards localities that maintain clear, consistent data and dispels informal or discretionary controls that are inefficient and undermine the rule of law. Because each state would craft its own Bill of Rights, variation could reflect real differences in geography and culture, but federal leadership and state-to-state learning would inhibit the emergence of unhelpful variations arising from merely accidental features of legacy code.
Participation would be voluntary but incentivized. As with BEAD, the federal government could offer planning grants and data-modernization funds to states that enact compliant frameworks, while fostering pressure for transparency through the Land Rights Map. Eventually, it might be appropriate to condition federal housing or transportation funding on laggard states’ compliance with mature land rights transparency norms, but a deliberate rollout—say, ten years—is desirable. It takes time for datasets to mature, for bureaucratic capacity to be built, and for frontrunner states’ experiences to ripen as models for laggards to follow. Over time, early success would feed adoption, as Coase-ification bears fruit in efficient, innovative and dynamic land use economies.
V. Step Three: Local Experiments in Tradable Property Externalities
Transparency and standardization set the stage for the final, most ambitious phase: enabling tradability in property externalities. This is where the NIMBY buyout process gains momentum. In places where potential value creation from urban development is high, local interests would tend to recognize the opportunity and act.
Specifically, once everyone knows who holds which rights and restrictions, communities can begin experimenting with ways to allow them to be bought, sold, or leased—transforming bureaucratic vetoes into negotiable claims. Local experiments might initially involve the same kind of theoretically participatory but practically cumbersome citizen voice that NIMBYism has often captured, but they would proceed to splinter barriers into individually-owned rights that could be traded and assembled to allow development to proceed. As local tradability regimes mature and spread, diffuse consultations with notional stakeholders would give way to efficient negotiations with parties directly and significantly impacted.
Consider three illustrative scenarios:
The corner shop. A homeowner wants to open a small store on a residential lot. A few neighbors object, but their disutility is modest—say $5,000 each. The entrepreneur expects $100,000 in value from the shop. Under current rules, the variance is denied. Under a Coasean regime, the entrepreneur compensates the neighbors, and everyone benefits.
The remote homestead. A rural utility is legally required to maintain expensive electric service to a single distant property. The owner could install solar and batteries for less. The utility buys out its obligation; the owner pockets the difference; both win.
The backyard chickens. Local rules forbid small livestock. Neighbors actually enjoy the idea and agree to waive their rights. The owner keeps a few hens, sells eggs, and community welfare rises.
All these scenarios have their pitfalls, but they illustrate the principle: make externalities negotiable rather than absolute. Theoretical objections– for example, I might abuse my neighbors’ permission to grow chickens by doing it at an industrial scale that becomes a neighborhood nuisance—may lack practical traction, but that’s why local experimentation is important. Because innovation here generates national learning, federal incentives and technical assistance—HUD might, for instance, fund competitive grants for local “Coase Labs”—make sense. And local experimentation would also allow communities to tailor safeguards for vulnerable groups, ensuring tradability does not become exploitation.
Conclusion: The Coasean Trick for Unlocking Development by Buying out the NIMBYs
Coase-ification is not a utopian blueprint but a politically feasible modernization of property rights. By buying out the NIMBYs, rather than simply overriding them, it can smooth the political path. Each stage of reform can attract a broad coalition, because it begins with information, and then benefits varied stakeholders. A Land Rights Map requires no ideological leap—only the belief that citizens deserve to know what rules govern their own property. It is a transparency project, a digital public good, like the broadband maps that have already shown how powerful visibility can be. The State Homeowners’ Bills of Rights that follow would likewise appeal across party lines: conservatives can see in them a reaffirmation of property freedom and local control, progressives a leveling of access and accountability, and technocrats an overdue data modernization. Finally, local experiments in tradable externalities would embody subsidiarity—diverse communities testing new arrangements without top-down mandates—while at the same time bringing the national interest in housing abundance to bear through HUD grants and technical assistance. Coase-ification does not need to start from consensus on values, only consent to clarity. From there, it proceeds through local experimentation along a path of approximate Pareto-improvement.
Beneath the politics lies an economic promise. Housing’s stagnation is not due to a lack of technology or capital but to the friction of uncertainty. When every project requires bespoke negotiation with opaque authorities, firms cannot scale; construction remains fragmented into countless small operators who survive by local familiarity rather than innovation. A transparent, standardized, tradable regime of land rights would lower transaction costs, making it possible for homebuilding to industrialize as agriculture, manufacturing, and information services did before it. Standardization would no longer mean monotony but interoperability: a market in which architects, builders, and homeowners can plug into the same visible framework of rights and responsibilities. Productivity would rise naturally from the emergence of larger firms and replicable models—what Coase would recognize as the economy discovering its efficient boundaries anew.
Ultimately, Coase-ification is a modest reform with radical implications. It replaces bureaucratic opacity with market clarity, partisan stalemate with exchange, and paralysis with learning. A nation that once surveyed the continent with chains and compasses can now remap its freedoms in code. If Coase-ification were achieved, America in the late 21st century might look back on a century of zoning from the 1920s to the 2020s as an unfortunate sojourn in a fog of central planning, before land use re-emerged into the capitalist daylight. And some of the innovative dynamism to which we’ve become so accustomed in the virtual environment would spill over into the built environment.
Ed Glaeser and his co-authors have explored the size of homebuilding firms and its relation to productivity. Homebuilding firms are extremely small relative to other sectors of the economy, with most work done by firms with fewer than 10 people on staff. They attribute this to fragmented local land use regulations, which block Levittown-style construction projects at scale. And they find that small homebuilding firm size reduces productivity through a lack of economies of scale and innovation. See:
Leonardo D’Amico, Edward Glaeser, Joseph Gyourko, William Kerr & Giacomo Ponzetto, “Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation” (2024, NBER working paper 33188, BSE working paper 1467).
Edward Glaeser & Joseph Gyourko, “America’s Housing Affordability Crisis and the Decline of Housing Supply” (Brookings Papers on Economic Activity, 2025).
See Bartik, A. W., Gupta, A., & Milo, D. (2025). The Costs of Housing Regulation: Evidence From Generative Regulatory Measurement. SSRN Working Paper. https://ssrn.com/abstract=4627587
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