Private Property Rights; Kelo v. City of New London, 10 Years Later

kelo1June 23, 2015 marks the ten year anniversary of the United States Supreme Court’s ruling in Kelo v. City of New London which struck considerable fear into the hearts of private property owners nationwide.

 

The Supreme Court has not returned to the subject, and its decision therefore stands as the Court’s last word on the meaning of the Public Use Clause. The problem for public and property rights advocates is that Kelo has essentially been forgotten.

If Kelo should return to prominence because some state or city prefers one private property owner over another, the U.S. Constitution will likely offer property owners no protection against whatever public benefits a majority of a state or local government can imagine.

Government uses its eminent domain power for a host of reasons. Classic examples are the need to construct a road or bridge, a port, a national park, or a government office building. More contemporary instances include the elimination of a public nuisance like an unprotected hazardous waste dumping site or a row of dilapidated crack houses.

The public generally understands that the government will exercise its eminent domain power to take private property in only three circumstances; when government will use it, when the public will use it, or when private parties will use or develop it for the public’s benefit in a quasi-governmental capacity (such as a regulated utility).

A decade ago, however, the Supreme Court of the United States gave its approval to an unprecedented and remarkable use of the eminent domain power. In Kelo v. City of New London, the Court ruled that as long as a property owner is paid the fair market value of what is taken, the U.S. Constitution permits a city to transfer that property from one private party to another, in this case, from a homeowner to a real estate developer, because the city prefers what, in their opinion, is a better use of the land.

Kelo decided that certain particular tracts of private property would be more profitable to the community if the property belonged to different owners and was put to a different use. Unlike what is supposed to happen in an urban renewal program, the city took perfectly maintained and functioning homes away from long-term city residents and gave the homes and the ground land to a private real estate developer in the hope of enticing a large corporation to locate a facility in the area.

The homeowners challenged the takings in court. They lost in the state courts, but the U.S. Supreme Court agreed to hear their plea. Unfortunately for the landowners, however, the Court ruled by a five-to-four vote that as long as just compensation is paid, the government may transfer property from one private party to another not to remedy a social ill, but as long as the government can mount the claim that the latter party will use the land in a manner that improves the local economy.

kelo2The sad irony in this instance is that the property, that was taken ten years ago, sits idle today. As the picture to the left indicates, no development ever materialized.  And the people that were displaced have essentially all left the area.

 

So what was the response to Kelo in Alabama?

Alabama was the very first state to react legislatively to the Kelo decision. Senate Bill 68 (2005) specified that eminent domain could not be used for “private retail, office, commercial, industrial, or residential development; or primarily for enhancement of tax revenue; or for transfer to a person, nongovernmental entity, public-private partnership, corporation, or other business entity.”

However the law left an exception for the seizure of so-called blighted properties. This would have allowed property to be condemned under blight law if it might become blighted in the future, or if the property is deemed “obsolescent”; which is code for “We want something else here.” And, if the property was condemned for blight, cities could then turn it over to private interests.  This problem was addressed in House Bill 654 (2006) which significantly closed the blight loophole by narrowing the criteria by which property could be designated as blighted.

This legislative fix however was not imbedded in the state’s constitution, and thus is subject to the whims of future lawmakers to amend as they see fit.

As we watch our current legislators, county commissioners and mayors frantically searching for every available source of revenue possible, we need to be particularly diligent to make sure the thrill and excitement in the guise of “economic development” does not overwhelm their sensibilities.

Maybe, now that ten years has gone by, it’s time to amend the constitution to protect private property ownership rights in perpetuity. AFA is studying the issue and may propose legislation in the next year to accomplish that objective.

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