Homepage

Real Estate > Investment Property
    SAVE   |   EMAIL   |   PRINT   |   RSS  
Taking your home away
The Supreme Court has ruled that New London could take homes away from their owners. What's next?
August 3, 2005: 9:17 AM EDT
By Les Christie, CNN/Money staff writer
Photo GallerylaunchSee more photos

NEW YORK (CNN/Money) - On June 23, the Supreme Court, in Kelo v. New London, ruled that the city was within its rights to transfer property from homeowners to private developers to build a hotel, condos, and an industrial park.

A public outcry immediately arose. And the decision may ultimately prove, ironically, to be a boost for property-right advocates.

Already in Kelo's aftermath, 25 state legislatures have introduced or promised to introduce bills aimed at clarifying and restricting the power of eminent domain, according to the man who argued the Kelo case, Scott Bullock, of the Institute for Justice, a public-interest law firm.

According to the Institute for Justice, hours after Kelo, the city of Freeport, Tex., moved to seize some waterfront properties from shrimp processing companies to build a marina development.

Two days after Kelo, Boston started proceedings to seize some waterfront as well.

In Newark, city officials told the Associated Press that a downtown condo and retail project would have been killed if the decision had gone against New London.

"It's a wake-up call that eminent domain abuse is a real problem," says Bullock, "one that the Supreme Court is not going to stop."

(Click here to see some historical turning points in the expansion of eminent domain.)

Points of view

"The court did not create any new law," says David Parkhurst, principle legislative counsel for the National League of Cities, which supports the decision. Instead, the Kelo ruling punted the issue back to the states, allowing each to determine its own use of eminent domain. "The court's ruling was a thumbs-up for federalism as a neutral principle."

The court was very clear, says Parkhurst, when it described what New London did: it formulated a comprehensive plan and maintained transparency throughout. The city reviewed six development plans and conducted public hearings before choosing one.

It was that plan that required the taking of property from Susette Kelo and others. And New London was able to show reasonable assurance that the plan would bring about the results it wanted.

According to Larry Morandi, a land use expert for the National Conference of State Legislatures, the decision was a narrow one. It does, however, remove some doubt concerning the prospects of a great many private developments counting on the use of eminent domain all around the country.

"The court said it deferred to state standards," Morandi says. He points out that eight states already have laws on the books prohibiting the taking of private property for private use; other states are free to enact their own.

Organizations like the National Association of Realtors supported Kelo because the use of eminent domain, coupled with the low threshold requirement that only requires a public benefit, "puts all property is at risk," says Bullock. "Wal-Mart will always pay more taxes than a private home."

Public is outraged

Public sentiment has been running dead against the decision. Other organizations and individuals filed briefs in support of Kelo, including such disparate groups as AARP, the NAACP, the American Farm Bureau Federation, and various property rights advocate groups.

A recent CNN poll found only one percent of responders thought that the government should be able to seize private homes or businesses for private development.

Parkhurst says that it's easy to use images of the evicted homeowner as a club to beat up supporters of this practice. "I doubt that you would have that wide-pan photo of jobless poor people," he says, the ones who might benefit from this use of eminent domain.

Bruce Fein, a former associate deputy attorney general in the Reagan administration, constitutional and international law expert, and a columnist for the Washington Times, calls the Supreme Court decision justified.

The well-established principle governing the controversy is decades old, he points out.

The Constitution clearly states that government may take private property. The taking must be for public use, however, and fair compensation must be paid to the landowner.

In 1954, when the Supreme Court ruled in Berman v. Parker, "public use" became "public purpose."

In that case, Washington, D.C., condemned a slum area and sold it to private developers. The taking of property no longer had to be for a public road, park, or courthouse; it could be used to advance economic development.

"Blighted" properties have been taken for private development since Berman. It was only a matter of time before governments began seizing properties that had not fallen into poor condition.

In fact, Fein calls the outcry against Kelo "hypocrisy." Middle-class homeowners didn't object to taking property from people too poor to maintain it to middle-class standards.

Fein believes it's helpful that the court encouraged the states to enact legislation addressing the proper use of eminent domain.

The issues facing the various regions and states can be very different. The land-rich West may have entirely different considerations than states in the densely populated Northeast.

Success stories

Advocates for eminent domain say that it has been indispensable for revitalizing local economies, creating jobs, and generating revenue that enables cities to provide essential services.

Success stories include the Times Square redevelopment in New York, the Inner Harbor in Baltimore, a speedway in Kansas City, and a mall and entertainment complex in Newport, Kentucky. In the absence of eminent domain, a single holdout could have doomed each of these developments.

An example Parkhurst regards as especially telling is also in Connecticut, which has some of the poorest cities in the Northeast.

Bridgeport, New Haven, Hartford, and New London have all suffered from joblessness and the social problems that accompany poverty. Chronically cash-poor city governments find reversing the trend difficult.

One exception stands out: Stamford, which has used its powers of eminent domain liberally to revitalize a once haggard downtown. It now hosts Fortune 500 company headquarters, shopping malls, and hotels.

Failures

Some say these successes are the exceptions.

"I lived in the neighborhood where Berman was centered," says Bullock. "It's now a sterile lifeless area of huge federal buildings and apartment houses with no street life."

Other notable failures include: Spruce Street in New Haven, which destroyed a busy business and residential area; Fresno, where homes were destroyed to build a turkey processing plant, which closed after a few years; and New York City, which took over a residential building to house the New York Stock Exchange, which never moved in.

Some good may come of the controversy. "It's beneficial for everyone to cope with these issues," says Fein. "Active citizen involvement is critical for a healthy democracy."

Parkhurst, however, is concerned that outrage over the decision could lead to laws that handcuff cities from using the practice in a very appropriate manner.

Morandi says Delaware was the first state after Kelo to enact legislation against the practice and Texas seems primed to join them.

In Texas, the State House unanimously approved a constitutional amendment this month that would prevent state and local governments from seizing homes for private development. Interestingly though, it specifically will exclude the new Dallas Cowboys football stadium, still in its preconstruction stage.

Such exceptions could be part of the legacy of Kelo. State and local governments may be hard-pressed to find answers to intractable problems that the careful use of eminent domain could help solve.

As Parkhurst says, "Be careful what you wish for. You may get it."

(Click here to see some historical turning points in the expansion of eminent domain.)  Top of page

graphic


YOUR E-MAIL ALERTS
Social Issues
City Planning
Supreme Court
Manage alerts | What is this?