No For Sale Signs Allowed III

This third post about why a municipality’s ban on for sale signs persists more than 30 years after Linmark focuses on the role of real estate agents and the local realtor’s association. (You can read the prior posts here and here.)  These are the players best-positioned to legally challenge an ordinance that affects the sale of property.  Moreover, the use of signs by one agency would likely create pressure for others to use them, which might make the practice in the Village tip in favor of signs.

When I first began examining the Village’s ordinance, I hypothesized that real estate agents have a financial incentive to comply with the ordinance because the perceived inability to use a for sale sign makes selling by owner extraordinarily difficult.  I’ll begin with the economics of the ban, even though my research hasn’t been terribly revealing.  Then I’ll turn to the norms of the local real estate industry, to which my initial hypothesis did not attribute enough significance.

The best evidence I’ve found about the anti-competitive effects of the sign ban come from a 1989 article in a major regional paper. The article discusses the success the Village has had with integration and cites the ordinance forbidding for sale signs as one of the tools the Village uses to prevent white flight.  It quotes the then-director of the Village’s Community Relations Department as commenting, “We will continue to ban the signs on the basis that our ordinance has not been challenged.”  The article then goes on to explain:

 Realtors objected to the ban at first.  But [the Village] gets cooperation from the realtors today.  The key reason, [the director] said, is that they are making money.  Most homes are sold by local realtors who have access to the multiple listings.  Outside realtors also aren’t allowed to erect signs and aren’t encouraged to sell in [the Village]. [The director] estimated that 75 to 85 percent of the real estate agents who sell in the village belong to the [local] board of realtors and consider themselves part of the community and its efforts.

Those who have been following these posts will recall that in addition to its ordinance, the Village has what is  described as a “voluntary agreement” with the local realtor’s association that its members won’t use signs.  The combination of the phrase “voluntary agreement” and the above-quoted statement raises questions about whether a lurking antitrust issue exists within the Village. 

Conversations with real estate agents and a representative of the local realtor’s association, however, provided scant support for my theory that real estate agents reap an economic benefit from the ban.  When I raised the issue of financial gain, I heard the same response multiple times: because of the role the Internet plays in house-hunting, for sale signs are not that important anymore.  (An employee at the Village’s Community Relations Department said something similar.  I suspect that this is what the Village would emphasize if it had to defend the ordinance in court, as Linmark discusses the lack of satisfactory alternatives to for sale signs.)  Some agents also pointed out that for-sale-by-owners could now pay to put their property on the Multiple Listing Service, something I didn’t know when I first considered the Village’s ordinance.  It is true, however, that agents who belong to the local realtor’s association use signs when they list in neighboring municipalities.  This suggests that they perceive signs to have some residual value.  At the very least, the signs may allow agents to compete against each other, as the typical for sale sign also advertises the listing agent.

It is probably unsurprising that my conversations yielded so little about the anti-competitive effects of the ordinance.  (Of course, the Internet was also a non-factor at the time of the 1989 article.)  Anti-competitive effect would be best measured through quantitative empirical work, beginning with an analysis of whether the Village has for-sale-by-owner rates that are comparable to nearby municipalities with similar housing stock, and whether non-local realtors are as active in the Village as elsewhere.  But I want to emphasize that some of the people I spoke with had little incentive to dissemble.  When they said that the prospect of financial gain was not playing a role here, I was inclined to believe that they were telling the truth, at least as far as they were concerned.

Instead of economic incentives, almost everyone emphasized the dynamics of the local real estate industry.  As I explained in a prior post, I was surprised when individual agents didn’t realize that the Village’s ordinance was problematic under Linmark.  When I asked them to speculate about why those who did recognize the First Amendment problem would continue to abide by the ban, the agents described a real estate community that is tightly-knit and in which all agents are interdependent.  Agents count on each other for honest feedback about how a home should be priced, how it is staged, and so forth.  Sometimes giving this advice can be counter to an agent’s own interests.  One reason that agents cooperate is because the playing field is perceived as level, with no agency overtly trying to gain a competitive advantage.  To illustrate this point, one individual mentioned that she was surprised when an agency began posting total sales in its window, as this sort of jockeying was contrary to the norm within the Village.  Putting up a sign would surely raise the ire of one’s fellow agents.

Just as important, the 1989 article I quoted above described real agents as “consider[ing] themselves part of the community and its efforts.”  This was very much evident in my conversations.  Certain local real estate agencies—as opposed to branches of nationwide agencies—are very active in the realtor’s association.  Everyone I spoke with described these agencies as becoming committed to the goal of preventing white flight in the Village after witnessing what happened in certain Chicago suburbs during the 1960s and 1970s.   From what I could gather, the local realtor’s association and the Village’s Community Relations Department have done a good job of heightening awareness about fair housing issues.  I was struck by agents who said that even if the ordinance was struck from the books,  they would still want to abide by it out of respect for the Village and its integration effforts.  One prominent member of the real estate community said, “I know [the ordinance] is unconstitutional.  But I respect the authority of the Village.”   The individuals with whom I spoke  were all local and they clearly had a real sense of pride about the extent to which the Village had successfully integrated. 

This is not to suggest that I think all agents are motivated to abide by the ban because of their commitment to the Village’s integration efforts.  Agents can be fairly described in a number of ways:  some don’t know about the constitutional concerns;  others (may) favor the ban because of economic considerations; and still others percieve themselves as partners in the Village’s integration efforts.  Some agents fit multiple descriptions.  Moreover, all agents are working in a municipality where signs are not the norm.

On one hand, it is easy to describe the sign ban as persisting because of a wink and nod between the Village and the local realtor’s association.  One reason the Village doesn’t have to enforce its ordinance is because the local realtor’s association does it for them; if a (usually non-local) agent puts up a sign, the association will call and ask that it be taken down.  It is probably fair, however, to describe the Village as having decided that integration is more important than the commercial speech involved here, at least until someone challenges its ordinance.  

Herein lies the rub, at least for me.  The Village has managed to become significantly more integrated than neighboring municipalities; in many respects, the results of its efforts are enviable.   In my next post on this topic, I’ll write more about integration and broader community norms.  

P.S.  I received some great comments on my prior posts, both on the blog and in private emails.  I also received comments from individuals who are familiar with the municipality I’m discussing and were seeking to turn the post into a referendum on various Village policies, and/or misrepresented what actually happens in the Village.  To reiterate what I said in my first post, I am interested in the larger question of what happens when government fails to formally repeal unconstitutional laws and about how community norms can trump Supreme Court precedent.   I welcome all comments in this vein; I’ll delete all others.

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