The Unbounded Home

When you buy a house, you might think that you are in control of that house and its value.  But in reality, your house’s value depends on a wide variety of factors beyond your control, such as the perceived desirability of your neighbors, local highway and transit policies, and trends in national and regional housing markets.  Your home may be your castle in a physical sense- but its value is heavily affected by what goes on outside the residential setting. In her new book The Unbounded Home, University of Chicago law professor Lee Fennell addresses the implications of this reality and of homeowners’ attempts to reassert control over property values through restrictive covenants and zoning.

3 minute read

September 14, 2010, 7:57 AM PDT

By Michael Lewyn @mlewyn


When you buy a house, you might think that you are in
control of that house and its value.  But in reality, your house's value
depends on a wide variety of factors beyond your control, such as the
perceived desirability of your neighbors, local highway and transit
policies, and trends in national and regional housing markets.  Your
home may be your castle in a physical sense- but its value is heavily
affected by what goes on outside the residential setting.



In her new book The Unbounded Home, University of Chicago law professor
Lee Fennell addresses the implications of this reality and of
homeowners' attempts to reassert control over property values through
restrictive covenants and zoning.



Covenants are usually designed to protect property values by excluding
certain obnoxious activities.  Through covenants, homeowners contract to
give away some of their property rights in exchange for a veto power
over nearby homeowners' use of their property rights.  Zoning, by
contrast, involves municipal ordinances rather than enforceable private
contracts.



But under either system, a city or group of homeowners must either
absolutely prohibit or absolutely allow certain activities.  Fennell
points out that this approach often leads to inefficiencies- that is,
rules that create X amount of harm to one homeowner (or group of
homeowners) while creating less-than-X amount of benefit to others. 
Fennell suggests a statue of a gnome as an example.  Suppose Beasley
lives in a community that has banned yard art such as garden gnomes. 
Gnome privileges will win Beasley $600 in intangible psychic benefits,
an amount in excess of the $500 cost the gnomes will impose on the
community as a whole.    Fennell suggests that a more efficient system
would allow Beasley to install the gnome and compensate the community
for its "loss", thus resulting in a societal surplus of $100. However,
both zoning law and covenant law are not flexible enough to allow these
type of transactions.



Fennell suggests a variety of market-oriented solutions to the gnome
problem, and critiques each proposed solution. One simple option would
be to create fee schedules for rule violations; homeowners could pay for
the right to install gnomes.  But a set fee schedule might be too
inflexible, or lead to definitional problems. Fennell proposes a more
complex but possibly more equitable solution: using self-assessed
valuations to set fees.  Under this system, the homeowner would set the
value of his right to install gnomes, and the city or association would
have to either purchase his right or let him pay for the right.



At the end of the book, Fennell makes a broader attack on homeownership
as currently conceived.  She asks: if a buyer of ice cream doesn't have
to buy a stake in the company, why should the buyer of a home have to
purchase the risk of national and international housing trends?  The
current system forces homeowners to put nearly all of their capital in
one investment, thus creating economic catastrophe when house values
plummet.



As a remedy, Fennell proposes "Homeownership 2.0"- unbundling the
physical value of a home itself from the broader economic risks of the
housing market.  Ideally, investors would create financial products that
would allow a homeowner to alienate some of those risks.  For example,
an investor would sell a kind of insurance against declining property
values, promising to make up some of the difference between existing
values and a future price in exchange for an insurance premium.   Or the
investor would bet on housing price premiums, buying the right to
receive part of a house's appreciation; the homeowner would benefit by
using the money to invest in more diversified holdings.  But as Fennell
admits, there are "many [design issues] that would have to be confronted
in translating the H2.0 concept into a workable policy."   So someone else will have to do the detail work of figuring out how to make Homeownership 2.0 profitable.


Michael Lewyn

Michael Lewyn is a professor at Touro University, Jacob D. Fuchsberg Law Center, in Long Island. His scholarship can be found at http://works.bepress.com/lewyn.

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Cover CM Credits, Earn Certificates, Push Your Career Forward

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

July 16, 2025 - Diana Ionescu

Green vintage Chicago streetcar from the 1940s parked at the Illinois Railroad Museum in 1988.

Chicago’s Ghost Rails

Just beneath the surface of the modern city lie the remnants of its expansive early 20th-century streetcar system.

July 13, 2025 - WTTV

Blue and silver Amtrak train with vibrant green and yellow foliage in background.

Amtrak Cutting Jobs, Funding to High-Speed Rail

The agency plans to cut 10 percent of its workforce and has confirmed it will not fund new high-speed rail projects.

July 14, 2025 - Smart Cities Dive

Worker in yellow safety vest and hard hat looks up at servers in data center.

Ohio Forces Data Centers to Prepay for Power

Utilities are calling on states to hold data center operators responsible for new energy demands to prevent leaving consumers on the hook for their bills.

July 18 - Inside Climate News

Former MARTA CEO Collie Greenwood standing in front of MARTA HQ with blurred MARTA sign visible in background.

MARTA CEO Steps Down Amid Citizenship Concerns

MARTA’s board announced Thursday that its chief, who is from Canada, is resigning due to questions about his immigration status.

July 18 - WABE

Rendering of proposed protected bikeway in Santa Clara, California.

Silicon Valley ‘Bike Superhighway’ Awarded $14M State Grant

A Caltrans grant brings the 10-mile Central Bikeway project connecting Santa Clara and East San Jose closer to fruition.

July 17 - San José Spotlight