Eminent Domain For Commercial Development: Scotus Hears About It

Lynne Kiesling

Today the Supreme Court hears the oral arguments in the Kelo vs. New London eminent domain case. Bill Steigerwald’s column in today’s Pittsburgh Tribune-Review is an interview with Scott Bullock, the Institute for Justice attorney who will be making the argument for the landowner.

Bullock will try to persuade the high court to overturn a decision by the Connecticut Supreme Court that said it was OK for the city of New London to use eminent domain to take private property from homeowners and give it to a private developer because the new owner might produce greater “economic development” or generate more tax revenue for the city.

Bullock, who grew up in Greensburg and graduated from Pitt law school in 1991, is a senior attorney for IJ (ij.org), the libertarian public interest law firm that has waged a national campaign in courts and in the media against government eminent domain abuse.

One of IJ’s most poignant wins to me was the blocking of Pittsburgh’s exercise of eminent domain to condemn properties along Fifth Avenue for the construction of a new retail development at Fifth and Forbes. The lynchpin in the argument is the definition of “public use” and “in the public good”, which are the grounds upon which eminent domain rights rest. I find the extension of eminent domain rights to be one of the more disturbing encroachments of government power upon individuals, and that it thus should be scrutinized and watched carefully. Eternal vigilance, you know!

Among the useful resources in considering eminent domain are a new study from Reason Public Policy Institute on the political economy of using eminent domain for private, commercial reasons, and Reason’s amicus brief in Kelo vs. New London. As the Reason press release states,

“More and more we are seeing homeowners and small businesses displaced by the whims and financial desires of city councils under the guise of eminent domain,” said Samuel Staley, Ph.D., director of urban and land use policy at Reason Foundation and lead author of the report. “Once upon a time, eminent domain was reserved for severe cases of blight. Now, if a city thinks that it can generate more tax money with redevelopment, the government plays the eminent domain card.”

Reason concludes that a growing number of governments are using eminent domain to circumvent the conventional real estate market. Eminent domain forces property owners to sell their property to the city while the city then turns around and sells the property to developers. Private developers can reap significant financial gains through this process. Reason finds these decisions are increasingly driven by local politics, not respect for property rights, and give well-connected property developers significant advantages over homeowners and small businesses.

The Reason study offers in-depth analysis of two cases that are similar to the Kelo case soon to be heard by the Supreme Court. That case involves Susette Kelo and her neighbors, whose non-blighted homes were condemned by the city of New London, Conn., so that developers can build luxury condos, a hotel, and office space.

Another useful analysis is Ilya Somin’s policy analysis of the issue for Cato. Somin also wrote an amicus brief in Kelo vs. New London for noted urban scholar Jane Jacobs. As Somin’s executive summary says,

Federal and state courts should ban economic development takings. Such takings are usually the product of collusion between large and powerful interests and government officials against comparatively powerless local residents. They generally produce far more costs than benefits, as the Poletown case dramatically demonstrates. Finally, the economic development rationale renders nearly all property rights insecure because it can justify virtually any taking that benefits a private business interest.