Skip to main content

Higher Home Prices, Brought to You by Oklahoma's Occupational Licensing Machine


Increasingly, people across the ideological spectrum recognize the costs of occupational licensing. Almost since its inception, the 1889 Institute has highlighted several of the least justifiable licensing regimes in Oklahoma. Each individual license may seem, if not harmless, then at least only slightly harmful on its own. But the effects add up. It is estimated that licensing costs $203 billion each year, and results in up to 2.85 million fewer jobs nationwide. One of the principle ways Americans build lasting wealth is through home ownership. So a license that interferes with this process is particularly galling. 

The transaction costs of buying and selling a home in Oklahoma are too high. This is not a matter of opinion, like “the price of gas is too high” or “the luxury goods I would like to own cost too much.” It is an empirical fact. The way Oklahoma regulates the Abstracting and Title Insurance industries tangibly and demonstrably impacts the cost of buying and selling a home. 

In order to get a mortgage loan, you need title insurance. This protects both the buyer and the lender against clouded title - claims by people other than the seller that they own part or all of the property. Typically title insurers do some level of research on the ownership history of the property. This eliminates some of their risk - any viable claim against the property will be based on pre-existing ownership rights. In many states insurers can determine how much risk is efficient - that is, when the extra research to further reduce their risk costs them more than the insurance payouts they are likely to make. 
In Oklahoma, title insurers are not allowed to make any such risk determination. They are required by law to have a licensed abstractor gather all the recorded documents relevant to the parcel’s ownership history, back to when it was owned by a government entity. Then they are required by law to have a licensed attorney examine the documents and write an opinion of title. 

Five regulations in particular inflate the cost of buying and selling real estate with no benefit to consumers. You are paying the price for these regulations, whether you own property or not: landlords must pass these costs along to renters, and retailers do the same with their customers. It’s an overhead cost of doing business, but it is not inevitable. The most burdensome policies, in order, are:

• Requiring every abstracting company to create and maintain a title plant.
• Requiring Title Insurers to have an attorney review a full abstract, created or updated by a licensed abstractor. An update can only be of a previous abstract created by a licensed abstractor.  
• Requiring every abstracting company to have a certificate of authority from the abstracting board.
• Requiring a license to work as an abstractor (a license does not allow licensees to operate their own abstracting companies, but merely allows them to perform abstracting work for a company with a certificate of authority).
• Requiring a permit to begin building a title plant.

1889 Institute’s study on abstractor licensing revealed that Oklahoma has fewer abstracting offices than one would expect given its population, population growth, and number of mortgages. This is because abstracting companies are protected from competition by the requirements of licensure, especially the requirement for a full title plant. Oklahoma also has more title professionals than expected. This is likely due to the requirement that all abstracts be  to sovereignty. Other states would regard the earliest history of the property as largely irrelevant, or at least unnecessary to protect consumers. The research of these early documents is largely busywork - explaining why Oklahoma has so many title professionals. 

The national average cost of title insurance and abstracting (after adjusting for the cost of living in individual states) on a $250,000 home is $1,421. The cost in Oklahoma is $1,708. The average cost in states that do not require title plant ownership is only $1,380. That’s 328 dollars that could be saved on every transaction. And don’t forget: just because the government doesn’t require a service doesn’t mean it’s not available. Consumers are still free to request these services in other states. They’re simply not forced to pay for them.

Oklahoma should deregulate abstracting. Insurers should be allowed to determine how much risk to accept. These seasoned professionals will find the optimal risk point while protecting consumers. The interests of consumers and insurers are aligned, meaning the public can trust insurers to protect their bottom line, which in turn protects the consumer. Oklahoma should abolish the Abstractors Board, allow anyone to search and examine a title’s history, allow title insurers to rely on county records, and allow insurers to choose the length of title search that is right for their customers. 

Only one body is empowered to end the occupational licensing menace in Oklahoma: the Oklahoma Legislature. Certainly no current member was in office when Abstractor licensing was passed - the same is true of most other occupational licenses. But the failure to correct such an obvious problem, especially when legislators are the only ones who can fix it, makes them still culpable. There are a handful of outstanding legislators who do all they can to oppose occupational licensing - both combating new laws and repealing old ones. But they are too few, and they are outnumbered by those who fail to consider the compound consequences of licensing, instead trying to please the few industry insiders and their lobbyists. 

Mike Davis is Research Fellow at 1889 Institute. He can be reached at mdavis@1889institute.org.


Popular posts from this blog

Friday Special: The Left’s New Fear of Speech

As we said there in rejecting Virginia's claim that the only way it could enable its citizens to find their self-interest was to deny them information that is neither false nor misleading: "There is… an alternative to this highly paternalistic approach. That alternative is to assume that this information is not in itself harmful, that people will perceive their own best interests if only they are well enough informed, and that the best means to that end is to open the channels of communication rather than to close them. - Thurgood Marshall, Linmark Associates, Inc. v. Township Of Willingboro , 431 U.S. 85 (1977) With 2020 being such a caustic year, many novel innovations will be forgotten. Does anyone remember that the global shutdown was supposed to last three weeks to “flatten the curve?” The phrase probably rings a bell now that you hear it, but I bet you haven’t thought of it lately. We took for granted that something had to be done. We blithely accepted that lockdowns wer

OG&E and the Corporation Commission Aren’t Doing Their Jobs

At the time of this writing, it’s been a full week since there was power at my home. I live within OG&E’s electrical grid, so when it comes to being without power this past week, I’m nothing special. Many of OG&E’s customers had no power for days, and some will have no power for well over a week. By the time power is restored to everyone in their service area, OG&E’s own estimate is that it will have taken ten full days to repair all the damage from Oklahoma’s latest ice storm. Ice storms are bears, no doubt about it. They are very hard on trees, and if the roads ice over, they are very hard on cars. But roads, for the most part, were not an issue during Oklahoma’s “Icemageddon” of 2020. The problem was the extra weight of the ice on trees, wires and poles. And what we discovered was that Oklahoma’s electric power grid, once again, was not up to the challenge. Fact is, Oklahoma’s power grid isn’t up to much of Oklahoma’s weather. Every time the electricity goes out, which

Official Statement of 1889 Institute: Open Oklahoma’s Schools

Byron Schlomach, director of the 1889 Institute, issued the following statement today regarding the ongoing school closures throughout Oklahoma as a result of the Oklahoma State Board of Education’s response to the COVID-19 virus: Way back in March, the 1889 Institute first protested school closings based on then-existing evidence that school-age children are not prone to the disease, evidence confirmed in intervening months. This evidence, combined with the failure of school districts to provide a rigorous online education and the hardship on two-earner families created by distance learning, makes it clear that closing the schools has, indeed, been a policy error of epic proportions. To that end, 1889 Institute is calling on the Board of Education to rescind its current guidance that recommends such closures and reopen traditional brick and mortar schools immediately following the upcoming Christmas break. Not doing so is a disservice to both students and parents and will have a last

Think Carefully before Voting on SQ 802

So we vote next week on whether or not to expand Medicaid according to Obamacare’s provisions. A vote “Yes” on State Question 802 would expand Medicaid to able-bodied adults above the poverty line. A vote “No” would keep the status quo, with taxpayers buying health care under Medicaid mainly for poor children and pregnant mothers. But as with just about anything proposed by initiative, State Question 802 is not really that simple. For one thing, it forever entrenches a federal program, which can be changed by Congress at any time, in our state’s constitution, which is not so easily amended. Obviously, the proponents of SQ 802 want to set the terms of the Medicaid expansion permanently, sidestepping our constitutionally instituted legislature, which is supposed to react and adjust to existing circumstances. SQ 802 would take that flexibility away. A consequence of that reduced flexibility will likely be sacrifices in other state-financed programs such as public education, both in the n