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Should Homes Get Stronger Protection Against Eminent Domain than Other Property?

Cornell lawprof Eduardo Penalver's praise of California Proposition 99 for claiming to protect homes, but not other property against development takings raises the more general question of whether homes should get more protection against eminent domain than other property. Penalver is perhaps the leading academic advocate of the view that they should (see this article for a statement of his views). I take the opposite position. As a general rule, all property should get the same level of protection against takings, regardless of function.

The standard "subjective value" argument for giving homes a special status in takings law is much less compelling than many believe. And even if homes do have higher subjective value than other property uses, the subjective value problem is only one of many good reasons for restricting takings. The others all apply with equal force to other property uses.

I. Homes and Subjective Value.

The main argument for giving homes special status in takings law is that they have unusually high "subjective value," the benefit that the owner derives from his property over and above its market price. As scholars have long recognized, the use of eminent often destroys subjective value because owners are only compensated for the "fair market value" of the property condemned by the government. Although it's possible to increase the level of compensation above the market price (as is done in Britain and Canada), it's hard to calculate subjective value with any precision. Thus, governments are highly likely to undercompensate the owners of condemned property in cases where the land in question has high subjective value. For this reason, many argue that the law should it make it more difficult to condemn high subject value property than property that has little value to the owners beyond its market price.

Homes, Penalver and others claim, tend to have higher subjective value than other properties. For example, many people have lived in the same house or apartment for years and have a strong emotional attachment to it. Others have strong attachments to their neighborhoods or to friends and relatives who live nearby. This valuable "social capital" might destroyed if they were forced to move.

It is indeed true that homes often have high subjective value. But at the same time, there are many homes that do not. On the other hand, there are many non-residential uses of property that have high subjective value of their own.

People like Susette Kelo and many of 4000 people expelled from their homes in the notorious 1981 Poletown case have lived in the same neighborhood for decades and have strong social ties there. But the Susette Kelos of the world are offset by the many homeowners who are more like me. I've only lived in my current apartment for a few years, don't know most of the neighbors, and attach relatively little subjective value to my condo. In a highly mobile society where many people move regularly, my case isn't that unusual.

By contrast, many non-residential property uses generate as much or more subjective value as most homes do. Perhaps the most common type of property condemned in "blight" or economic development takings is small business property. And many small businesspeople surely attach high subjective value to their businesses. Many would lose a large part of their customer base and community ties if forced to move by eminent domain, and these losses aren't included in the fair market value of the condemned land. Churches and private conservation areas are two other examples of non-residential property uses with high subjective value. Certainly, many churches have value to their clergy and worshippers that go far beyond the market price of their land and physical infrastructure. Both are often threatened by "economic development" condemnations, as Jonathan Adler and I discuss in this article (see also my discussion of the vulnerability of churches to takings in this 2006 post).

In sum, the distinction between homes and other property is a very poor proxy for subjective value. Many homes have little or no subjective value. And many of the most commonly condemned types of non-residential property tend to have high subjective value of their own.

II. Other Reasons for Restricting Takings.

Even if the subjective value rationale for limiting takings does apply more strongly to homes than other properties, there are a large number of other reasons for limiting condemnation that apply equally to all property. I can't possibly discuss all of them here. But my 2007 Supreme Court Economic Review article criticizing Kelo-style "economic development" takings considers several in detail. Among the most important are 1) the tendency of eminent domain to be "captured" by powerful interest groups who use it to victimize the politically weak for their own benefit, 2) the flaws in the political process that make it difficult or impossible for voters to monitor the quality of takings initiated by government, 3) the superior efficiency of the market in allocating land to its most highly valued uses, and 4) the tendency of development takings to cause net economic harm to the very communities they are supposed to benefit. All of these reasons for restricting takings - and a number of others raised in my article - apply just as much to commercial and nonprofit property uses as they do to homes.

Your home should indeed be protected against condemnation like a castle. But so should your business, your church, and any other legitimate uses that you might have for your land.

BruceM (mail) (www):
No, but non-homes should not get weaker protection. Everything should have equally strong protection.

I've always felt the same should be true of 4th Amendment protection. I feel I have just as reasonable an expectation of privacy in my house as I do in my car, or my friend's apartment, or in my cousin's Winnebago, or my parent's condominium. It's not so much that houses have stronger protection; rather, everything else has weaker proteciton. Plain view aside, I just never accepted that reasonable expectations of privacy differ between homes and other private places. Sure, one's home is one's castle, but that just implies non-castles deserve less protection. Why?
6.5.2008 7:30pm
Dilan Esper (mail) (www):
I think Ilya gives short shrift to the types of subjective value people have in their homes. The hassle of moving is part of the subjective value. The effort in making a home seem one's own is part of the subjective value. The desire not to have to move one's kids to new schools with new sets of friends is part of the subjective value. These things are all unique to homes, they don't necessarily depend on how long one has lived in one's home, andthey aren't compensable in the same way that the harm of forcing a business to move is.

Again, this conjures up "Property and Personhood". Ilya's argument seems to me to lead towards ensuring we compensate businesses adequately, including for such things as lost opportunity costs, moving costs, and lost customers. That should all be part of "just compensation", and if the law doesn't provide for that, it should. But that's not Kelo.

And what most people see as wrong with Kelo is that it hits homeowners, where, as Professor Radin observed, taking away one's home is taking away a part of their personhood.
6.5.2008 7:37pm
ys:

These things are all unique to homes, they don't necessarily depend on how long one has lived in one's home, andthey aren't compensable in the same way that the harm of forcing a business to move is.

Have you noticed that when small stores, restaurants, movie theaters, etc. that are part of a neighborhood have to close or move for a variety of reasons, there are grass roots groups that try to prevent the closing, and if the reason is purely financial provide financial help? Now imagine that the reason for closing is an eminent domain taking.
6.5.2008 7:49pm
Snarky:
"All property should be protected alike, regardless of function."

I have a hypothetical for you. Imagine a world where you have to type of protection against takings, high protection and low protection.

It seems to me that you would prefer a world like this:

homes = high protection : other = high protection

No, imagine that this ideal world is not possible. What would be your second best choice?

(1) homes = high protection : other = low protection
(2) homes = low protection : other = high protection
(3) homes = low protection : other = low protection

Is the equality of protection for homes and other properties such an important principle to you that you would choose (3) as your second best choice?
6.5.2008 7:51pm
Ilya Somin:
I think Ilya gives short shrift to the types of subjective value people have in their homes. The hassle of moving is part of the subjective value. The effort in making a home seem one's own is part of the subjective value. The desire not to have to move one's kids to new schools with new sets of friends is part of the subjective value. These things are all unique to homes

Actually, very few of these are unique to homes. Moving costs apply to businesses, churches, and many other properties too. And many people try to make their churches, businesses, conservation properties, and so on, "seem their own."

Ilya's argument seems to me to lead towards ensuring we compensate businesses adequately, including for such things as lost opportunity costs, moving costs, and lost customers. That should all be part of "just compensation", and if the law doesn't provide for that, it should. But that's not Kelo.

Actually, the points I raise in Part II of the post justify banning many takings, not merely increasing compensation. And even the Part I issues include the difficulty of calculating subjective value, making proper compensation impossible. I discuss the inadequacy of compensation as a remedy for takings problems in great detail in Part II of this article.
6.5.2008 7:52pm
Snarky:
Previous post after editing...

"All property should be protected alike, regardless of function."

I have a hypothetical for you. Imagine a world where you have only two types of protection against takings, high protection and low protection.

It seems to me that you would prefer a world like this:

homes = high protection : other = high protection

Now, imagine that this ideal world is not possible. What would be your second best choice?

(1) homes = high protection : other = low protection
(2) homes = low protection : other = high protection
(3) homes = low protection : other = low protection

Is the equality of protection for homes and other properties such an important principle to you that you would choose (3) as your second best choice?
6.5.2008 7:53pm
Ilya Somin:
It seems to me that you would prefer a world like this:

homes = high protection : other = high protection

No, imagine that this ideal world is not possible. What would be your second best choice?

(1) homes = high protection : other = low protection
(2) homes = low protection : other = high protection
(3) homes = low protection : other = low protection

Is the equality of protection for homes and other properties such an important principle to you that you would choose (3) as your second best choice?


I never said that "equality of protection" is the most important principle. In my view, the choice between 1 and 2 would be a close call. The resolution would depend on whether homes or other properties were more likely to be condemned if given "low protection," not on any special value of homes as such.
6.5.2008 7:55pm
Elliot Reed (mail):
I think there's an inconsistency between your implicit claim that poor people's homes and businesses have high subjective value and your claim that the market is the value-maximizing way of allocating land. The latter is true, at least given certain idealized assumptions, but it's based on measuring "value" in dollars (willingness to pay). By that metric, the vast majority of poor people have low subjective value in their homes, in that the above-market payment it would take to make them willing to move is much lower than the above-market payment it would take to make rich people willing to move.

When you're measuring "subjective value" in dollars, poor people have low subjective value for everything, so you're stuck saying that taking their homes and businesses isn't that problematic. But if you're measuring it in utils, the claim that markets are maximizing value becomes meaningless because there's no way to measure utils or their sum.
6.5.2008 8:11pm
Richard Aubrey (mail):
I believe that awards in some civil suits for things like "pain and suffering" put a (sometimes) extremely high value on subjective......things. Subjectives. Whatever.
Which leads to the proposition that the subjective cost of losing a home to eminent domain could be quite high, if you had a good lawyer who was getting a third of it.
I will be moving across the state in a year. Last weekend, I was standing on the roof, cleaning the gutters and doing various maintenance. I looked around at the neighborhood and regretted already leaving it.
It's not nothing. It's just not. And when you're forced into doing it, it's worse.
Among other things, you would probably feel inadequate, pushed around, a lesser being, since the State forced you to do it and people who heard your complaints laughed at you for being such a stick in the mud in the way of progress.
Yeah. That's worth a whole lot.
6.5.2008 8:40pm
Dilan Esper (mail) (www):
Actually, very few of these are unique to homes. Moving costs apply to businesses, churches, and many other properties too. And many people try to make their churches, businesses, conservation properties, and so on, "seem their own."

I think you are equating commercial activity and one's basic life choices in a manner that is really not consistent with most people's preference sets.

Yes, it is true, people put emotional investment in their businesses. But it's almost always subordinate to money, which is not true of homeownership. Consider the following:

Person A is a small business owner. He has an opportunity to increase his profits by 35 percent by moving to another location.

Person B is a homeowner who has lived in his home for 4 years with 2 children who go to good local schools and have made many friends and acquaintances. He has an opportunity to obtain a home that will appreciate in value 35 percent faster by moving to another location.

Now, under your theory, these two people will be equally likely to move. But they aren't. And the reason is because economic considerations are much more comparatively important to business owners than personhood considerations, whereas the opposite is true of homeowners.

Actually, the points I raise in Part II of the post justify banning many takings, not merely increasing compensation.

Well, there are also policy arguments against your position and in favor of treating homeowners differently. For instance, we may want to encourage stable homeownership, while encouraging efficient economic activity with respect to businesses.

Further, your policy arguments aren't really very good.

1) the tendency of eminent domain to be "captured" by powerful interest groups who use it to victimize the politically weak for their own benefit

Small businesses are usually organized into a chamber of commerce. I would say that even small businesses have far more protection in the political process than lower-income homeowners do.

2) the flaws in the political process that make it difficult or impossible for voters to monitor the quality of takings initiated by government

This proves too much. Takings are legal, with just compensation. Anti-Kelo reforms only bar a narrow form of taking anyway. They don't solve the problem of inefficient takings.

3) the superior efficiency of the market in allocating land to its most highly valued uses

Same point. Anti-Kelo reforms don't solve the problem of inefficient takings. I might add as well that you assume the market's "superior efficiency", but that's not correct. Sometimes the market is efficient, sometimes it isn't.

4) the tendency of development takings to cause net economic harm to the very communities they are supposed to benefit

Well, again, anti-Kelo reforms only bar takings in narrow instances. There will still be plenty of takings for public use that will cause net economic harm.

And even the Part I issues include the difficulty of calculating subjective value, making proper compensation impossible.

But since small business takings are not as likely to cause uncompensable subjective value harms (see Property and Personhood), you can compensate them with a liability rule. You just have to pitch the compensation high enough to capture all of the potential harms. Indeed, this is MUCH more likely to lead to economic efficiency (because it is based on shifting the actual externalities) than a blunderbuss prohibition would (because it would permit holdouts).

What you can't compensate with a liability rule is forcing people out of their home.
6.5.2008 8:42pm
Sam Hall (mail):
Change the law so that the government has to pay 2 times the replacement value plus expenses. If the government wants it that bad, they can have it.
6.5.2008 8:47pm
Public_Defender (mail):
Groups like the Institute for Justice smartly look for homes to fight for in eminent domain cases because the public puts a higher emotional value on protecting homes.

The law also puts a higher value on homes. In criminal law, breaking into a home is considered more serious than breaking into a business. The Fourth Amendment protects against unreasonable intrusions into " persons, houses, papers, and effects", but makes no reference to businesses. Search for "a man's home is his castle" in cases and you will likely find that cliche enshrined in your state's case law.

It's not that big of a reach to give greater protection in eminent domain cases.
6.5.2008 8:50pm
AK (mail):
I feel I have just as reasonable an expectation of privacy in my house as I do in my car, or my friend's apartment, or in my cousin's Winnebago, or my parent's condominium. Sure, one's home is one's castle, but that just implies non-castles deserve less protection. Why?

Because Katz v. United States was incorrectly decided. Hugo Black was all over the place in his decades on the Court, but he was right in rejecting the "reasonable expectation of privacy" standard.
6.5.2008 9:23pm
Cornellian (mail):
Although it's possible to increase the level of compensation above the market price (as is done in Britain and Canada), it's hard to calculate subjective value with any precision.

Could it be that Canada and Britain now have better protection of homes against eminent domain than we do?
6.5.2008 9:28pm
Splunge:
I think a lot of the new post is pretty weak, logically.

(1) "Some homes have a high subjective value, but others don't." Uh, so? Those who don't put a high subjective value on the home will take the gummint's money and move, period. (Even if you can fight City Hall in Court, it's a big pain in the wazoo, so why do it if you don't care very much?)

So the law will ipso facto only be invoked by people who do indeed have a huge subjective value in their house. There's no reason to even consider people who don't mind selling out to the government at market price. They're not relevant.

(2) "Businesses often have a big subjective value." I've never heard of anyone clinging to one address even at the cost of losing money, whereas plenty of people refuse to move from the family home not only when they lose money, but (e.g. radon, lack of reliable levees, closeness of flammable forests) when it puts their lives at risk. There's just no comparison.

Furthermore, the argument about having to move meaning losing your customer base is pretty weak. It might have meant something in the 1930s, when a big chunk of your customers had to be within walking distance, and when your major advertising was word of mouth in the neighborhood. But in these Internet-connected, freeway-connected times? No way. Indeed, trends among businesses generally are to regard the address as less and less important, to buy where land is cheap, and figure you can reach people with the Internet and they'll drive to get to you if they need to.

This does not follow for homes, because the interest people have in their home is not just (or even mostly) economic. A home is not a money-making venture, generally. It's a refuge, a place to be comfortable, et cetera. The immediate surroundings matter enormously more than they do for a business, and are profoundly less replaceable.

Whether this is how it should be is not relevant, I submit. This is how people actually are, and there is no point in drafting legislation that would work well for another, more logical version of humanity, but not the one that actually exists.
6.5.2008 9:51pm
Francis (mail):
wow, this post is really all over the place.

First, Ilya, you are blurring the line between "is" and "ought". As the passage of Prop 99 shows, a majority of people do attach higher subjective values to owner-occupied residences than other property. Perhaps they ought not to, but that just demonstrates a failure of libertarians like yourself to educate the public.

Second, relatively few businesses are completely incapable of relocation. A neighborhood bar, an inner-city nursery (personal experience on that one -- it was located under high-tension power lines), buildings with distinct architecture all can be lost forever due to condemnation. Everybody else just relocates.

Third, the irrational value that people attach to homes is exactly why Prop 98 failed; rent control is popular. Maybe it shouldn't be. But there's that is/ought problem again.

Whoever decided to link eminent domain abuse protection with the elimination of rent control must be ruing that decision. They got the funding to get the signatures to put the Prop. on the ballot. And look at the backfire. Instead of getting everything you wanted, you're worse off than before.

oops.
6.5.2008 10:15pm
Nathan_M (mail):

Could it be that Canada and Britain now have better protection of homes against eminent domain than we do?


Unlike the US, there is no constitutional limits on expropriation in Canada, so in that way the US has better protection. (Canada calls it "expropriation" instead of "eminent domain".) There is a common law rule that the government must pay compensation when it expropriates land, but that can be overridden by statute.

Having said that, in practice Canadian compensation seems much more fair than what is given in the US. Also, while the government has the theoretical power to expropriate land for a private development project, I can't recall that happening on a large scale.
6.5.2008 10:17pm
Paul Barnes (mail):
I also believe that in Canada, all the land is technically under government jurisdiction. In other words, the government can force people to sell their land. However, this is several scales above my pay grade, but that is what I have heard.
6.5.2008 10:48pm
OrinKerr:
BruceM writes:
I feel I have just as reasonable an expectation of privacy in my house as I do in my car, or my friend's apartment, or in my cousin's Winnebago, or my parent's condominium. It's not so much that houses have stronger protection; rather, everything else has weaker proteciton. Plain view aside, I just never accepted that reasonable expectations of privacy differ between homes and other private places.
Good news, Bruce: You don't have to accept it, because it's not an accurate statement of Fourth Amendment law. In fact, your personal intuition happens to match how the law has been interpreted (with the exception of some meaningless dicta in some automobile cases).
6.5.2008 10:49pm
Frater Plotter:
The law also puts a higher value on homes. In criminal law, breaking into a home is considered more serious than breaking into a business. The Fourth Amendment protects against unreasonable intrusions into "persons, houses, papers, and effects", but makes no reference to businesses. Search for "a man's home is his castle" in cases and you will likely find that cliche enshrined in your state's case law.

Hear, hear. This is precisely the matter at hand.

"Subjective value" is not the issue; after all, under Austrian economics, all value is subjective. As a corollary, objective "appraisal" of value, needed for "just compensation", is not possible: the price that a buyer would be willing to pay for the house is not always the price that the owner would be willing to sell for. If appraisals yielded an objectively true value, then the owner would always be willing to sell for that value plus $1, and there would be no call for eminent domain.

The issue is that people's residences have a unique importance to our humanity, our culture, and our law. Every civilized branch of humanity (that is, excluding only nomads) has a notion of houses and the households that live in them as a fundamental structure of society. This is recognized by both law and social custom at all levels: in social customs dealing with invitation, welcome, visiting, and hospitality; in law dealing with residence, trespass, burglary, marriage and separation, child care.

Disruption of houses and households, thus, is disruption of social order itself.
6.6.2008 2:50am
BruceM (mail) (www):
Orin: What about the automobile exception? Also, caselaw says I have no reasonable expectation of privacy in my office, nor in my computer at work. Of course, if I stay the night at someone else's place of residence (whether it be a home or a condo or an apartment), I am usually afforded some expectation of privacy. But not if I'm just hanging out there during the day. That's never made any sense to me. The cases are usually the product of result-oriented decisionmaking in that some people are hanging out at a friend's apartment bagging drugs and counting drug money, the cops came in without a warrant, and the court wants to affirm the denial of the defendants' motions to suppress.

AK: Katz v. United States extended the 4th Amendment to wiretaps. The only thing about Katz that I've always disliked is the overly-cited notion that "the Fourth Amendment protects people, not places." It should protect both. Both people and their places (whether they own the place or exist in the place or keep propery in the place) can be searched and seized. Thus, the 4th Amendment should apply to both people and places.
6.6.2008 3:17am
Bob Ewing (mail) (www):
Susette Kelo just announced a one-day event to help draw national attention to property rights and end eminent domain abuse.

She is mobilizing activists nationwide to join her newly created Susette Kelo Liberty Club, where members simply pledge to make a special one-day small-dollar donation for private property rights.

The internet donation drive takes place on Monday, June 23 — the three-year anniversary of the infamous U.S. Supreme Court decision in Kelo v. City of New London that ruled Susette's house, and every house in America, can be bulldozed for private development projects.

Every dollar raised by Susette on Monday, June 23 — Kelo Day — will go directly to fighting eminent domain abuse.

Kelo Day event webpage:
http://www.ij.org/KeloDay/
6.6.2008 9:25am
David M. Nieporent (www):
"Businesses often have a big subjective value." I've never heard of anyone clinging to one address even at the cost of losing money,
Do you people who keep saying things like this not know anybody who owns a family business? (I don't just mean a so-called mom+pop store; I mean a mom+pop store that actually used to be owned by the current owners' mom+pop.)

whereas plenty of people refuse to move from the family home not only when they lose money, but (e.g. radon, lack of reliable levees, closeness of flammable forests) when it puts their lives at risk. There's just no comparison.
Nobody "loses money" by not moving from a family home; it may decline in value, but if you're not selling, you're not losing anything.
6.6.2008 11:40am
Mike G in Corvallis (mail):
I've only lived in my current apartment for a few years, don't know most of the neighbors, and attach relatively little subjective value to my condo.

Ilya, I think you know what you're talking about. But I don't think you know at all what many of the rest of us are talking about.
6.6.2008 12:22pm
Dilan Esper (mail) (www):
Do you people who keep saying things like this not know anybody who owns a family business? (I don't just mean a so-called mom+pop store; I mean a mom+pop store that actually used to be owned by the current owners' mom+pop.)

1. I don't make the broader claim (unlike the poster you are responding to) that business owners never stay in a location despite losses-- but they are clearly LESS likely to than a homeowner is to stay in a home that might decrease in value or increase less than another address. Clearly, running a business is far more commercial and less tied up with personhood than owning a home is.

2. There are 2 separate questions here-- (a) do mom and pops sometimes lose money; and (b) should government policy favor giving a mom and pop that is losing money the benefit of a property rule rather than simply compensating the business under a liability rule for a taking. And it seems to me that there are strong economic efficiency arguments in favor of a liability rule rather than a property rule with respect to businesses that lose money.

Again, this really was all covered by Margaret Radin's "Property And Personhood". I am having law school flashbacks from 16 years ago-- this isn't an area I practice in, but I learned my property law from Nomi Stolzenberg, who learned hers from Radin. It's kind of funny to watch Ilya, who is a very smart man, fail to come to grips with Radin's arguments of 25 years ago.
6.6.2008 1:54pm