Property Rights Part of Texas Surge, California Slump

California has recently surpassed Michigan to become the state with the second-highest unemployment rate, according to a recent report. The Golden State reported a rate of 11.9% for the month of April, down from 12% in March but created a meager 9,000 jobs in the process. Texas, in contrast, created 32,000 new jobs in April, and has contributed 37% of all new jobs created in the United States in the last two years. The contrast in results is matched by a contrast in attitudes towards property rights.

To cite one absurd regulation, California requires landlords to conduct “energy audits” of tenants, even where the tenants pay their own utilities. Under laws such as the California Environmental Quality Act (CEQA), court challenges to new developments are commonplace, protracted, and expensive. The result is predictable: developers vote with their feet. Business publications have taken note as well: both Forbes and Chief Executive have ranked the state among the worst for business climate. Even the tech sector, which allegedly benefits from regulations favoring “green” solutions, has grown by only 2% in California in the past decade.

While California has arguably the strictest land-use laws in the nation, Texas has arguably the least restrictive. The cities of Houston and Dallas, for example, do not even have zoning bylaws. As a result, housing supply was able to expand to meet demand, and the slower price growth actually prevented over-valued mortgages and high foreclosure rates. Texas experienced virtually no housing bubble or bust .

The Texas approach to eminent domain also reflects a philosophy which protects property rights. For example, Governor Perry recently signed into law a bill which prevents eminent domain abuse by banning seizure of property for private use, and requires the compensation for seized land to be equal or greater than a fair market assessment of the property. In short, businesses and residents in Texas know that they can build what they need, find housing that they can afford, and know that their property will not be seized unfairly by the state.

When individuals and businesses can choose where to locate, they choose freedom. This point is graphically demonstrated by the directions of the nation’s two largest states.