October 5, 2005
By Mike Krause
In June of this year, the U.S. Supreme Court held that the U.S. Constitution allows local governments to seize private property to make way for private development that might create new jobs or increase tax revenues. Now nobody’s home or business is safe from either greedy government, or moneyed special interests looking for sweetheart deals backed by government muscle.
In Kelo v. City of New London, the Supreme Court ruled that private homes and businesses in the working class Fort Trumbull neighborhood of New London, Connecticut, could be condemned and seized to make way for the private development of hotels, condominiums, and office space. There was no claim that the area was blighted, but rather that the new plan would bring jobs, higher tax-revenues, and “general economic wealth” to the city.
The Fifth Amendment to the U.S. Constitution states, “Nor shall private property be taken for public use, without just compensation.”
Bizarrely, the Court ruled that seizing perfectly good privately owned real estate to transfer to another private entity “does not diminish the public character of the taking.”
Justice John Paul Stevens, writing for the majority, said, “promoting economic development is a traditional and long accepted function of government.”
According to the Washington DC based Institute for Justice (IJ), which argued the case, “Thus because the City of New London intended that the plan would benefit the city in the form of higher taxes and more jobs, the homes could be taken.” (emphasis added)
Actually, the best way for government to stimulate economic development, beyond promoting an overall tax and regulatory friendly environment, is to protect rather than weaken property rights.
Peruvian economist Hernando de Soto has shown that a main cause of poverty worldwide is a lack of formal property rights, writing that “Capitalism requires the bedrock of property and other legal institutions, yet most people outside the West have no solid property rights.”
So rather than an impediment to the grand schemes of politicians, solid property rights are the real driving force behind economic growth and liberty in America. The government taking of private property for the benefit of another private entity is simply legalized theft; the stuff of third world nations.
Justice Clarence Thomas, in his own dissent to Kelo, points out that taking property for urban renewal has historically displaced minorities and the poor, writing, “Regrettably, the predictable consequence of the Court’s decision will be to exacerbate these effects.”
And indeed, it is precisely the poor who need secure property rights, to be able to invest a life’s savings to start a small business.
Justice Sandra Day O’Connor wrote in her dissent, “Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Cartlon, any home with a shopping mall, or any farm with a factory.”
There is nothing inherently wrong with shopping malls or factories. But Kelo has turned local governments into real estate agents, that like the mafia, you cannot say no to.
According to IJ, “In the first two months after the decision, more than 30 municipalities began condemnation proceedings for private development or took action to authorize them in the near future.”
While probably not the intent of the land grabbers in New London, Kelo has reinvigorated the importance of property rights across the country. Legislation aimed at eminent domain abuse has been introduced in Delaware, Texas, Massachusetts, Minnesota, New Jersey, and Rhode Island. Legislators in at least eight other states have announced they will introduce eminent domain bills in upcoming sessions.
In September, IJ issued a report on the decision, including a list of “basic elements” for the writing of statutory protections against eminent domain abuse. Examples include, among other things:
- Disentangle the designation of a redevelopment area for funding purposes and an area where property may be taken for private development. This allows cities to still get funding and acquire property voluntarily but prevents the use of eminent domain for private development.
- Ensure that the statute or constitutional amendment applies to all entities that engage in eminent domain, using a term like “all political subdivisions.”
The report is available at http://www.castlecoalition.org/kelo-whitepaper/
Colorado State Representative Al White (R, District 57) already plans to introduce a constitutional amendment more narrowly defining acceptable public use of private property in Colorado. According to Rep. White, his amendment will specifically ban eminent domain for economic development.
The title of “Defender of Property rights” is up for grabs in Colorado. Hopefully lawmakers from across the political spectrum will want to get in on the action.