How to pay off NIMBYs

It's not as crazy as it sounds

Somewhere in a suburb near Dublin, in a community centre room booked for the occasion, a four-storey apartment block is being politely killed.

The objectors are not crazy cranks. Take Tom and Mary, both retired lawyers. They love their neighbourhood. It’s where their children grew up. Their local residents’ group chat is surprisingly peaceful and harmonious. They have worked hard to get where they are. And they are not keen on giving up the suburban dream lightly. They regard themselves as neighbourhood defenders.

They are unhappy about the proposed development. It will be four storeys, housing about 100 people.

Tom and Mary have a few complaints about the development. It will overdevelop the area. It could introduce “transient” people. It could introduce extra traffic. Where will they park?! And has the developer taken into full account the potential impact, positive or negative, on the migratory patterns of the Common Swift? Have the developer’s well-paid environmental consultants and lawyers homework been checked by other well-paid environmental consultants and lawyers?

This allegory is intended to show a few things. First, the concerns of NIMBYs are often real. The new apartment building will likely affect Tom and Mary and their neighbourhood. For example, given the slow pace of road building and railway expansion, the new residents will likely add some congestion to the area.

Second, NIMBYs will use whatever tools are made available to them to stop development. If environmental regulations work, then their objections will be about the environmental paperwork. If you can find a planning policy or objective violated by this development, you can call upon that in your objection (you will always be able to find a conflict with planning policy and objectives by the way). All of this is a pretext to stop the development. The actual complaint is usually just that the new development will make their life slightly worse in the short to medium run but that isn’t exactly grounds for planning or legal challenge.

If that’s all correct, what is the government supposed to do about it? How should governments confront NIMBYism? There are roughly three options.

First is to convince people that new development is good. Second is to remove people’s ability to object. And the third option is to ensure that new development benefits local people so that they have selfish reasons to support new development. All three make sense to me. But the last option is the most important.

We just need more comms

The first option is to ask people to put on their green jerseys. Occasionally the government will ask people to simply stop objecting to new development. The government’s argument is that people should consider the national interest or the interests of would-be homeowners or renters.

In a way, the government has taken this approach quite seriously. The Department of Public Expenditure, Infrastructure, Public Service Reform, and Digitalisation aka DPER recently published a circular expressing the government’s latest YIMBY policy: the benefits realisation framework. The basic idea of the policy is to ensure that the benefits of new infrastructure are properly communicated. You can see here the five page tool the government has released to help state agencies (and their professional communications teams) to communicate the importance of new infrastructure.

I am not against the idea of the government being more systematic and deliberate about communicating the benefits of development. It can’t hurt to make the case better. It is just as important, as Machiavelli would tell you, to appear to do good than it is to actually do good.

But this idea seems to imply that people like Tom and Mary are against new development because they are misinformed. That doesn’t seem right to me. I am sure Tom and Mary are well aware of the benefits of new housing just like the residents of Dartmouth Square were surely aware of the idea that metro systems are a good idea.

State agencies already spend quite a bit of money on public relations. For example, it is reported that the NTA paid about €1 million on public relations for BusConnects alone. I don’t think the benefits realization framework will change much because I don’t think communications is the bottleneck.

Removing landmines

The second idea is to limit people’s ability to stop projects. This is a much more promising approach.

The government is doing some good reforms on this. Planning permissions given within Urban Development Zones will not be subject to appeal to An Coimisiún Pleanála. The Critical Infrastructure Act disapplies Section 15 of the Climate and Low Carbon Development Act 2015, which mandates public bodies to give “regard to” the Climate Action Plan among other things. That means that people can’t challenge projects on the basis that the authority didn’t properly “have regard to” the Climate Action Plan. There are also some upcoming promising judicial review reforms.

This is a necessary part of any reform package. On its own, it will probably help. But if you remove people’s ability to protest projects entirely (which the government is categorically not doing), then there will be a backlash. And the backlash will come because people like Tom and Mary still have a reasonable complaint.

The case for bargaining

That brings us the third way to confront NIMBYism. And that is to address the reason why people object to development. Progress Ireland has written about mechanisms to address just this in the past. One idea, Street Plan Development Zones, creates a mechanism which enables local residents to financially benefit when they approve more housing in their area. Another, land readjustment, allows landowners to benefit when they combine their plots to pay for large scale infrastructure. The basic idea of these and other ideas like them is to create win-wins, where locals and new residents both benefit from new development.

I still support these ideas. I think they would meaningful make a difference to the political economy of development in Ireland. But a reasonable objection to all of these ideas is that they are too clever by half.

A simpler idea may just be to bargain with NIMBYs. Before you recoil at the suggestion of a national policy of bribery, allow me to make the case.

People will be less inclined to object if development benefits them. So, we should make sure development benefits them.

Development creates a surplus. In other words, successful development creates value in the sense that the thing getting built is worth more than the money it costs to build it. The problem arises when we look at where that surplus goes.

Right now, the planning system burns that surplus up in various frictions like paperwork, delays or legal challenges. These frictions are sometimes called transaction costs.

The idea of bargaining in this context, inspired by the economist Ronald Coase, is that it can reduce transaction costs, allowing more of the surplus to go towards actually getting the thing built.

So the argument is: you want people to object to housing less. One way to do this is to allow them to bargain with developers. And one way to bargain is to exchange money.

You might think this is crazy. You might think that of course we shouldn’t be paying off NIMBYs. Isn’t this just a defence of brown envelopes?

(I should note at this point that I am not advocating for the return of brown envelopes.)

But one thing that may be surprising is that some parts of the State successfully do something like this already. For example, all renewable energy projects under the RESS scheme must pay €2/MWh into a community benefit fund. An incinerator in Dublin has paid over €10 million into a community gain fund. Wind Energy Ireland also reports the success of their fund here.

Other parts of the State do proxies for the same thing. Developers already “pay off” many people. For example, development contributions help fund councils, which is a way of sharing the benefits of development with local people. Supplementary development contributions go towards specific public goods, like electrified rail and LUAS lines. Sometimes this comes in the form of “in kind” public benefits. For example a planning authority may issue a condition on a planning permission, such as building a park or a creche. Part V (now Part VII) of the Planning and Development Act mandates that developers transfer 20 per cent of their land (or monetary equivalent) for social and affordable housing.

All of these examples take the surplus of development and try to direct it towards the social good like parks, social housing, and new infrastructure.

So what’s the problem? The surplus of development is already being rerouted in a bunch of ways towards benefitting local councils and people. We are, in other words, already in the habit of paying off NIMBYs in a variety of indirect ways. But it doesn’t seem to be working.

One answer is that it isn’t working because the surplus isn’t actually targeted at the right people. Most of the money is benefitting a diffuse group of people, rather than the Tom and Mary’s of the world who live next to the new development.

Could pay offs work?

This brings us to the simple idea of giving people cash. Could this work where the expensive proxy systems have failed? A forthcoming paper by Michael Hankinson, Ed Glaeser, Joseph Gyourko, and Morris Davis suggests it might. Here is how the Atlantic magazine summarised the paper (which is not yet out):

The team conducted a survey in which they asked about 1,700 residents of expensive areas, including New York City, Los Angeles, and the Philadelphia suburbs, to consider a series of hypothetical proposals to build housing in their neighborhood. Alongside each proposal, the respondents were offered (again, hypothetically) various amounts of cash, from $250 to $9,000, and then asked whether they would vote yes or no on approving the project. By aggregating those answers, the researchers were able to estimate the “willingness to accept” price: the amount of money needed to persuade the median voter in a community to shift from opposing a project to supporting it.

The results, which the researchers shared with me, suggest that almost everyone has a price. More than 80 percent of the respondents accepted at least one of the proposals they were offered.

The paper goes into some complicating but not unsurprising results too. For example, wealthy people in low-density neighborhoods required more cash to consider supporting new development.

The idea has been kicked about for a while. Some US think tanks have made similar recommendations with one arguing for a blanket $1,000 pay-out for local residents.

Cash bargains with stakeholders are not merely an academic exercise. France built a world-leading nuclear power industry, in part, by enabling lower taxes in the communities that hosted the reactors. Avoine, the commune that hosted the first EDF reactors, for example, saw annual revenue jump 100x in ten years.

Data centres in Loudoun County, Virginia do something similar to French nuclear. Loudoun has more data centre capacity than Beijing. But local residents support the data centres. The reason is because residents directly benefit from them. They have low tax rates and nice schools, all funded by hyperscalers and their data centres. By some measures, Loudoun is the richest county in the US.

The government has two parts of a three-part solution. They have the communications plan in place. They have begun to unpick the various means by which people can delay development. But the final piece is getting to the root of the problem. And that will mean finding mechanisms to ensure that local people can feel the benefits of new building in their back yard.