Even in this period of rampant foreclosure, two of the scariest words some older homeowners can hear are "eminent domain." Eminent domain is the process by which governments can take property from owners for “fair market value” on the grounds that the property is needed for some public good, like a new highway or stadium. But in practice, the good being served may not be as public as the takers have claimed.
That’s the conclusion many states have reached in reaction to the 2005 U.S. Supreme Court ruling that economic development is an appropriate use of eminent domain. As a result, 42 states have passed legislation (or issued a state court ruling) intended to blunt the effect of the case, Kelo v. City of New London. It’s too soon to fully assess the impact of the states’ reforms, but nobody claims that the problem is solved.
In Kelo, the Supreme Court ruling allowed New London, Conn., to condemn private property (for “just compensation”) and turn it over to a developer for a hotel, office park and upscale condominium building. The city had argued that because commercial development would generate new jobs and tax revenue, it was in the public interest. The court agreed.
In practice, however, the ruling meant that homeowners in certain neighborhoods across the country were vulnerable to losing their property for shopping centers or office parks. “Any home can make more money as a big-box store, so any home was up for grabs,” says Steven Anderson, director of the Castle Coalition, a property rights activism group based in Arlington, Va., and sponsored by the public interest law firm Institute for Justice.
And while any home could be up for grabs, the kind that tend to be grabbed are those found in older neighborhoods, which are often populated by low-income individuals or older citizens who have lived in their homes for many years.
“Elderly folks feel the pinch much worse when their homes are paid off,” Anderson says. “They stayed [in the same neighborhood] through the good times and bad.”
The Institute for Justice had predicted that in the wake of Kelo, the “floodgates” of eminent domain abuse would open. And it was right. In the year following the court’s decision, at least 5,783 properties were threatened or condemned for private development projects, more than double the number between 1998 and 2000, according to IJ’s research.
Activists and lawmakers across the country were outraged by what they considered the excessive powers that Kelo conferred on development-minded municipalities. “There has been a grassroots backlash that you see maybe once a century,” Anderson says.
Some of the state reforms go straight to the substance of the Kelo ruling. Alabama, the first state to act, mandated that eminent domain could not be used for any development designed “primarily for enhancement of tax revenue” or for transfer to “corporation or other business entity.” Florida barred any property gained through eminent domain from being transferred to private developers for 10 years thereafter.
In Iowa the governor’s veto of a comprehensive eminent domain reform bill prompted the state’s legislature to override a veto for the first time since the 1960s. When the governor of Arizona vetoed a bill prohibiting eminent domain for economic development, citizens collected enough signatures to place a similar proposition on the state ballot. It passed in November 2006.
In two states, Ohio and Oklahoma, the state Supreme Court ruled that it was unconstitutional to invoke eminent domain solely for economic development.
And the beat goes on. In June, California voters will see an eminent domain reform measure on a state ballot.
But has this flurry of state reform really helped curb eminent domain abuse?
“It’s kind of impossible to tell because so much of our information is anecdotal,” says Ben Barros, associate law professor at Widener University School of Law and a contributor to the book Private Property, Community Development, and Eminent Domain, published in April. In his opinion, however, “the vast majority of the laws passed were completely ineffective. To be effective, a law has to address the issue of blight.”