8/21/2005

Property rights and eminent domain: The Economist, 8/18/05

Hands off our homes

A Supreme Court ruling that allows the government to seize private property has set off a fierce backlash that may yet be as potent as the anti-abortion movement

If you ever doubted the importance of the Supreme Court, consider the fuss about Kelo v New London. The five-to-four ruling by the court on June 23rd, apparently giving the government the power to bulldoze homes on flimsy grounds, has set off fiery protests across the country.

Americans used to believe that their constitution protected private property. The Fifth Amendment allows the state to seize it only for “public use”, and so long as “just compensation” is paid. “Public use” has traditionally been taken to mean something like a public highway. Roads would obviously be much harder to build if a single homeowner could hold out forever or for excessive compensation. The government's powers of “eminent domain” have also been used to clean up “blighted” slums.

Kelo was about something different, however. A private developer in New London, Connecticut, wanted to raze some perfectly nice waterfront homes to build an office block and some posh apartments. The owners didn't want to sell. The city decided to force them to, calculating that the new development would create jobs and yield more taxes.

The Supreme Court took the city's side. Rejecting “any literal requirement that condemned property be put into use for the ...public”, Justice John Paul Stevens said it was enough that the seizure should serve some vaguely defined “public purpose” — such as those new taxes. This had nothing to do with slums or roads: instead, it massively expanded the government's power of eminent domain.

The backlash began immediately. Dissenting justices such as Sandra Day O'Connor (who retired last month) pointed out what extraordinary powers the court had just granted the government. “The spectre of condemnation hangs over all property,” she wrote. “Nothing is to prevent the state replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

If people can be evicted to make way for others who might pay more taxes, added Clarence Thomas, the court's only black justice, it is not hard to predict who the most likely victims would be. “Urban renewal”, he noted, has sometimes been nicknamed “negro removal”.

Seven days later, by a ten-to-one margin, the Republican House of Representatives passed a motion disagreeing with the court. A constitutional amendment to overrule Kelo is before the House, while a bill that would have a similar effect is before the Senate. Delaware, Alabama and Texas have already passed laws restricting the government's power to grab private property. Legislators from two dozen other states have either proposed similar bills, or promised to do so.

Meanwhile, a grass-roots movement has arisen to keep other people's hands off private homes. Libertarian groups such as the Institute for Justice, which were campaigning against eminent-domain abuse before Kelo, report an upsurge in support, both moral and monetary.

Property grabs on behalf of private developers have been common for some time: the Institute for Justice documented some 10,000 threatened or actual cases between 1998 and 2002. Several cities, including New York, claim that without eminent domain they could never have cleaned up their shabby centres; you could not have created the big spaces that modern retailers wanted at Times Square without forcing small shops to sell.

Since Kelo, the law may have shifted in favour of the men with the bulldozers, but public opinion has swung sharply the other way. Polls suggest that 90% of Americans disapprove of the kind of seizures allowed by Kelo. Such is the anger that some developers say they are shunning even the kind of eminent-domain seizures that would have been legal before Kelo.

Property-owners fighting against local government have been buoyed by the backlash. In the town of Ardmore, Pennsylvania, for example, a small group of businessfolk received letters last year informing them that their shops were to be demolished to make way for a new development including apartments and a parking garage.

Their story is typical of the cavalier fashion with which eminent domain has been used, even before Kelo. Ardmore is part of the township of Lower Merion: its board of commissioners had decided that Ardmore's central thoroughfare needed sprucing up. They had some federal funds to build a new railway station, and they decided it would be nice if more commuters could live nearby so they could walk to the station. But instead of offering to buy out the people whose businesses would have to be demolished, they simply told them they would have to move.

“It was devastating,” says Eni Foo, whose Chinese restaurant is on the list. “I've been in the United States since 1963. I came as a graduate student and stayed because I love America. I always believed America [respected] individuals' rights.”

The local government had declared the area “blighted”. But a brief walkabout reveals that it is no more blighted than the potato you ate for lunch. A couple of shop fronts are a bit tatty, but otherwise it looks fine. Indeed, the district has been officially designated “historic”, since much of it was built in the 19th century. The condemned properties include a second-hand shop that supports the local hospital, a club for veterans of foreign wars and Scott Mahan's stationery shop, which has been in his family since 1926.

“I'm not an activist,” says Mr Mahan, “but the more I read about it, the angrier I got. If they were going to do it the American way, they'd negotiate with everyone until everyone was happy. But using eminent domain is totally different.”

Mean streets
Those who are uprooted under eminent domain must be given fair compensation. But if they have no choice but to sell, it may be hard to determine what a fair price for their property is. Developers who know the sellers have to sell will surely be tempted to “lowball” their offers.

The question is not whether the development plan is good or bad. (Some say it will make Ardmore prettier and less congested; others that it will make it uglier and more yuppified.) What matters is whether the plan represents such a pressing public good that it is reasonable to use the state's vast coercive power to execute it. For most Americans, Interstate-95 passes muster, but yuppie condos don't.

The merits or otherwise of the Ardmore plan have been obscured by the protests it has provoked. The “Save Ardmore Coalition” now has 1,000 members — not bad for such a small town. Its members have linked up with national groups such as the Institute for Justice. And since Kelo, state and national politicians have started to take an interest. The Pennsylvania legislature is considering a bill to curb the abuse of eminent domain. Mr Mahan is going to testify.

Lower Merion's board appears to be retreating. Matthew Comisky, its president, admits that it was a mistake to send out those letters summarily telling shopkeepers they were to be evicted. He says that no final decision has been made as to whether to invoke eminent domain. The plan must first undergo an environmental audit, he says, and the board will not be able to vote on a final plan until next year. He denies that the protests have prompted the board to change tack, but admits that the protestors “have done a good job of publicising themselves.”

Small-government conservatives hope that Kelo will prove to be a tipping point. “Twenty years from now, people will look back at Kelo the way people look back at Roe v Wade [the 1973 Supreme Court decision that barred the states from banning abortion],” says Grover Norquist of Americans for Tax Reform, a lobby group.

Before Roe, state legislatures were legalising abortion one by one, without provoking much protest. Roe galvanised pro-lifers by suddenly making (fairly unrestricted) abortion legal everywhere in America, and by doing so in a way that many still regard as illegitimate. The majority judges decided that the constitution contained a “right to privacy” which, though not mentioned anywhere in the text, allowed any woman to abort her foetus in the first trimester.

The Kelo ruling was less convoluted, but its opponents think it equally unconstitutional. Mr Norquist calls it both “outrageous” and “manna from heaven”, since the property-rights movement it spawned will be at least as electorally significant as the anti-abortion movement. It will be worth 3-5% of the vote, he predicts.

Meanwhile, it has trebled Mr Comisky's workload. Since he also has a full-time day job as a lawyer, this means he hardly sees his family. “Last night I put my son to sleep at 9pm and got up 3am,” he says. He adds that he will not seek re-election when his term expires


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