Eminent domain

Despotism by stealth
Feb 17th 2005 | NEW LONDON
From The Economist print edition

You think America is a land where individualism holds sway and private property is sacrosanct? Next week, the Supreme Court decides whether that is true

NEW LONDON is an old Connecticut whaling town halfway between New York and Boston. The day before Thanksgiving 1998, Susette Kelo, a registered nurse, got an unwelcome holiday gift: an eviction order. Her house, and those of six other families living on an abandoned submarine base called Fort Trumbull, had been compulsorily purchased. She had five months to get out.

What is unusual about this is that her house is no rat-infested health hazard. She bought and spruced it up three years before. Nor is it being seized by a branch of government: the evictor is the New London Development Corporation (NLDC), a private non-profit body. The land is not going to be used for a public works project, such as a bridge or school. Indeed, it is not certain what her land is wanted for.


New London is trying to turn itself into a biotech hub. In 2000, it persuaded Pfizer to build its global research centre there. Now it wants Fort Trumbull for a biotech park, complete with hotel and fancy houses. Writs are flying. The residents accuse the NLDC of behaving like the Gestapo, pointing bulldozers at their front doors, surrounding an old lady's house with klieg lights and using deafening stone-crushing equipment in their backyards. The NLDC accuses the homeowners, who have less than two acres of land, of holding up a 90-acre development that would transform the city. In March 2004, the Connecticut Supreme Court ruled in the NLDC's favour by a 4-3 margin.

The case is now a celebrated one. Three of America's largest pressure groups, the AARP, the NAACP and Martin Luther King's Southern Christian Leadership Conference, have lined up behind Mrs Kelo. New London has the backing of practically every local-government umbrella-group as well as New York and the American Planning Association. The case has divided the Republican coalition, with defenders of private property rights and small-government types on one side, and big business and development interests on the other.

On February 22nd, these two juggernauts collide at the Supreme Court when it hears Kelo v City of New London. The case marks the biggest test for 50 years of “eminent domain” (or “compulsory purchase” as it is more accurately called in Britain).

This sounds technical, but it involves fundamental issues. When may the government overrule private property rights for the sake of the public good? What constitutes “the public good” in such a case? Does it make any difference whether that good is delivered by a public or a private entity? George Will, a conservative columnist, has even suggested that allowing the government to seize a person's home on the grounds that it can make better use of the property is creeping despotism.

Most people accept that private property rights should not be absolute. Mad grandpa in his tumbledown shack can be evicted so a school can be built. But the power to take over private assets in the public interest must be constrained. The constitution does this by saying that private property shall not “be taken for public use, without just compensation”. State constitutions follow that wording.

The blighted and the condemned

But what is “public use”? In the classic examples—roads and schools—it refers to entities that are publicly owned and which benefit everyone. But in 1954, the Supreme Court ruled in Berman v Parker that private projects meet the definition if they have a “public purpose”. The court approved a slum-clearance plan of the government of Washington, DC, over the objections of a local department-store owner. In the 1960s and 1970s, local governments often declared unsafe slums to be “blighted” and used the power of eminent domain to buy out people in the way.

Since then, two things have changed. First, definitions of “blight” have broadened. Lakewood, Ohio, condemned well-kept historic homes for being “functionally and economically obsolete”. In Lancaster, California, the city government condemned a discount store on the basis that a neighbouring retail giant, Costco, wanted to expand into it. “Blight” meant, in effect, making room for properties that would pay more tax revenue.

Second, local authorities have given up relying on blight at all. In 1981, the Michigan Supreme Court let the city of Detroit raze a working-class Polish neighbourhood, Poletown, so that General Motors could build a new Cadillac plant. The city did not condemn Poletown as blighted; it merely said a car plant would generate more taxes and jobs than a Polish neighbourhood. In this case, “public use” became something like “economic benefit”: private property may be taken if it obstructs a community's development.

New London did not use a blight designation. And Connecticut's Supreme Court said the economic benefits did not have to be substantial and certain (as had been required in Michigan). New London could condemn a property without knowing exactly how it was going to be used.

Defenders of eminent domain argue that these are logical developments, that courts have approved each step and that if voters dislike the outcome, then they can always vote the bums out. The last point is debatable in this case, because the city of New London has delegated its power of eminent domain to the NLDC. But the Supreme Court has traditionally given deference to local governments in local issues.

More broadly, argue the defenders, development in tough spots would stop without eminent domain. New London was dying before Pfizer put its research centre there. The new development, says the NLDC, would generate 1,000 jobs and up to $1.3m in annual taxes: who are seven people, who have anyway been offered compensation, to stand in the way?

Eminent domain has helped many big cities bounce back from decline. New York's Times Square is a good example: before eminent-domain purchases, 42nd Street was in poor shape. Shops now want to be huge (think Wal-Mart, or, indeed, Costco). Cities that have reinvented themselves as downtown malls, such as Indianapolis, have had to use eminent domain to acquire big enough sites. Otherwise, the shops would have fled to the suburbs.

Opponents reply that the system is not so much necessary as out of control. The Institute for Justice, which is arguing for Mrs Kelo in the Supreme Court, has combed through newspaper reports to count over 10,000 examples in which “eminent domain” condemnations have been used or threatened in 1998-2002—and that is just a fraction of the total.

They also dispute the claims that the courts have approved each step. Rather, they say, there is legal uncertainty. Last July, the Michigan Supreme Court reversed its “Poletown” decision, admitting the original was a “radical departure from fundamental constitutional principles”. And while a dozen states frequently use eminent domain for economic development, a dozen specifically ban or discourage it—with little evidence of harm. Georgia has seen no eminent-domain cases in the past seven years; Atlanta is overwhelmed by growth. Washington state forbids the practice for private development; Seattle has won a stack of awards.

The opponents say they do not want to get rid of eminent domain—just to tie its use back to a meaningful definition of blight. Put simply, cities cannot take someone's house just because they think they can make better use of it.

Otherwise, argues Scott Bullock, Mrs Kelo's lawyer, you end up destroying private property rights altogether. For if the sole yardstick is economic benefit, any house can be replaced at any time by a business or shop (because they usually produce more tax revenues). Moreover, if city governments can seize private property by claiming a public benefit which they themselves determine, where do they stop? If they decide it is in the public interest to encourage locally-owned shops, what would prevent them compulsorily closing megastores, or vice versa? This is central planning.

The Supreme Court will announce its decision in the summer. For local governments, it could change the way they develop towns. For private-property defenders, it could decide whether there any constitutional restrictions on eminent domain. And for Mrs Kelo and her neighbours, it will “merely” determine whether they can continue to own the houses which some of them have lived in since they were born.

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