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

Even If Pandemic Models Were Right, Were Covid Lockdowns Wrong?

1889 has been quite critical of pandemic modeling that government officials have relied on for their Covid-19 response. We have also criticized shutdown orders in light of flaws in the models. But let’s assume for a moment that the worst predictions really would have come true if nothing was done. Even in those worst case scenarios, it’s fair to ask if our governments did the right thing. Were involuntary shutdowns justified, or would people have found a way to both limit the contagion and maintain some level of productivity? Was putting healthy citizens under house arrest acceptable even if they were willing to risk infection?   While large groups of people are often compared to herd animals, we are not sheep. We don’t behave like animals. We can, have, and will step up when our communities are in danger. When government and journalists give incomplete or false information, people will act irrationally. Depending on the situation, some will blindly follow the first aut...
Read more

COVID Inspires Tyranny for the "Good" of Its Victims

The Christian philosopher, C.S. Lewis, once said, "Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies." The moral busybodies C.S Lewis warns of reminds me of those who would have Americans give up their liberty to combat COVID-19.   A recent Oklahoman op-ed compared COVID-19 to World War II, stating that the number of deaths from COVID-19 is approaching the number that died fighting for this country and the freedoms it protects. This comparison is, of course, nonsense. This suggests that a virus with a high survivability rate is an equivalent threat to the Nazi and Japanese regimes that brutally murdered millions. The piece uses wartime rationing of meat and cheese, a sacrifice necessary to ensure men on the front lines had adequate nutrition, to justify Americans accepting counterproductive lockdowns in exchange for additional stimulus c...
Read more

The High Duty of Elected Officials and Ways They Fall Short

With an election just completed (the alleged voting, anyway), a legislative session coming up, constant talk of spending to offset the impacts of COVID-19, and elected officials trying to mandate our way out of a disease, the duty of elected officials in their official positions is worth considering. The 1889 Institute recently published a booklet for state lawmakers that discusses various issues and possible solutions. Included in that booklet is a short discussion of the central duty of elected officials, which is expanded here. What is the central, over-arching duty of an individual after having been elected to public office? Public oaths of office give a strong hint, and the Oklahoma Constitution is a good place to start. Article XV includes the oath of office, which states that an Oklahoma public official swears to “support, obey, and defend” the constitutions of the nation and the state, that the official will not take bribes, and that the official will discharge duties as best...
Read more

1889 Institute's Statement Regarding School Closures

The 1889 Institute, an Oklahoma think tank, has released the following statement regarding Joy Hofmeister’s proposal to keep schools closed for the remainder of the school year. We at the 1889 Institute consider Joy Hofmeister’s proposal to close Oklahoma’s schools for the rest of the school year a gross overreaction to the coronavirus situation. Even in the best of times and circumstances, suddenly shifting every student in the state from traditional classrooms to online distance learning will have negative educational consequences. This in addition to the economic burden on two-earner families forced to completely reorder their lives with schools closed. We believe many of our leaders have overreacted to worst-case scenarios presented by well-intended health experts with no training or sense of proportion in weighing the collateral damage of shutting down our economy versus targeting resources to protect the truly vulnerable. We say reopen the schools and stop the madness. ...
Read more