The State of Post-Kelo Eminent Domain Reform:
For months, the legal world has held its breath in anticipation of the long-awaited revised version of my paper on post-Kelo eminent domain reform - the first comprehensive analysis of the over forty state and federal eminent domain reform laws spawned by the political backlash stimulated by Kelo v. City of New London. OK, maybe not.... But the revised paper is ready anyway, and now available on SSRN.
Over the next couple days, I will be blogging about some of the new evidence I have gathered, especially new public opinion data showing that - despite the strong public sentiment against Kelo and economic development takings - the overwhelming majority of Americans are unaware of the state of post-Kelo reform in their states. The data is analyzed in detail on pp. 42-49 of the paper.
"Victims" of Subprime Mortgages and Victims of Eminent Domain:
Steven Geoffrey Gieseler of the Pacific Legal Foundation makes an excellent point in decrying the great amount of attention paid to homeowner victims of subprime mortgages in the current presidential campaign relative to those who have lost their homes to eminent domain (hat tip: Tim Sandefur of PLF on Eminent Domain):
As the campaign for the presidency unfolds, candidates from both parties are squabbling over who can bail out defaulting homeowners first, and most. The mortgage crisis has become a central issue of the Democratic and Republican primaries. "Saving homes" is now a necessary mantra for everyone seeking the White House. Problem is, they're all trying to save the wrong homes....
As stressful as losing a home to foreclosure may be, most such homeowners at a minimum share in the blame for their predicaments. After all, many agreed to loan terms that amounted to little more than gambles that, it turns out, haven't paid off.
In contrast, those who lose their homes to their federal, state, or local governments via eminent domain for private purposes are victims in the truest sense of the word. These people have done nothing wrong other than live on plots of land that more politically connected parties, and the politicians they're connected to, have decided the owners are no longer worthy of keeping.
I would add one more point to Gieseler's compelling argument. Even if you do believe that those defaulting on subprime mortgages are innocent victims, any government bailout for them is likely to create innocent victims of its own: The taxpayers who will be forced to pay for it. This is doubly unfair to recent homebuyers who stayed within their means, and may now be punished for their financial rectitude by being taxed to bail out those who were more reckless. If you want banks and other lenders to pay for the bailout, that too will generate innocent victims. If lenders are forced to bail out defaulting homebuyers, they are likely to tighten up credit requirements for future buyers, thereby making homeownership less accessible to the poor and lower middle class.
On the other hand, we can help the victims of Kelo-style "economic development" takings with little or no collateral damage to innocent third parties. Not only are such condemnations damaging to property owners, they also tend to harm the general public by spending public funds on projects that usually provide less in the way of economic growth than would have occurred if the previous owners had been left alone by the government. I discuss the reasons why in great detail in this article. Banning economic development takings is a win-win for both threatened property owners and the general public. The same can't be said for proposals to bail out subprime borrowers.
Political Ignorance and Post-Kelo Eminent Domain Reform:
When the Supreme Court upheld the constitutionality of condemnnations for "economic development" in Kelo v. City of New London, it ignited a firestorm of political outrage greater than any other Supreme Court decision in decades. As I document in Part I of my updated paper on post-Kelo reform, 80-90% of the public disagreed with the decision, as did political leaders and activists from across the political spectrum. Forty-two states and the federal government enacted new legislation intended to curb eminent domain - a greater legislative response than that generated by any other Supreme Court decision in history. However, as Part III of my paper explains, the majority of these laws fail to impose any meaningful constraints on economic development takings, usually allowing them to continue under other names (typically, as "blight" condemnations).
Why have so many post-Kelo reform laws been ineffective? Recent public opinion data that I have collected through the Saint Consulting Group's Saint Index survey support my conjecture that political ignorance plays an important role. In the SCG's 2007 Saint Index survey, conducted last August, only 21% of Americans could correctly answer a question about whether or not their states had enacted post-Kelo eminent domain reform, and only 13% could both correctly answer that question and a follow-up question about whether or not their state's reform law was likely to be effective in curbing economic development takings. Public ignorance about post-Kelo reform - like opposition to Kelo itself - cuts across racial, ethnic, gender, ideological, and partisan lines. Moreover, the figures given above probably overstate the true level of public knowledge about post-Kelo reform; some significant number of respondents probably got the "correct" answers by guessing rather than because they actually knew. The survey data is presented and analyzed in detail on pp. 42-49 of my paper.
If most voters know little or nothing post-Kelo reform in their state or its likely effectiveness, it should be easy for politicians to pass off cosmetic "reforms" as genuine bans on Kelo-style takings. As I explain in the paper, this is a more compelling explanation for the relative paucity of effective reforms than the usual claim that reform has been stymied by developers and other powerful interest groups. In the absence of political ignorance, state legislators would not be able to benefit politically from sacrificing the desires of the vast majority of the public to the needs of small interest groups. After all, some 81% of Americans say they oppose the Kelo decision (63% "strongly"), and 71% say they support state legislation to ban economic development takings (43% "strongly") (see pp. 7-8 of the paper for cites). If even a fraction of those who strongly oppose Kelo were well-informed about post-Kelo reform, they could easily form a voting bloc large enough to outweigh the electoral influence of pro-condemnation interest groups.
The machinations of interest groups are certainly a part of the post-Kelo story. But those machinations would probably have been much less effective in the absence of widespread public ignorance. Ignorance about public policy is generally rational and is not a sign of "stupidity." But that doesn't prevent it from causing serious harm.
UPDATE: I would like to take this opportunity to thank the Saint Consulting Group for allowing me to insert two questions about public knowledge of post-Kelo eminent domain reform into their annual Saint Index survey. Obviously, the SCG is not responsible for conclusions I have drawn from the data they collected.
Assessing the Economic Impact of Banning Economic Development Takings:
The Institute for Justice (the libertarian public interest law firm that represented the property owners in Kelo v. City of New London) has an interesting study assessing the economic impact of post-Kelo reform laws that ban Kelo-style economic development takings.
Contrary to the "doomsday" predictions of planners and local government officials who claimed that eliminating economic development takings would drastically stifle development, the study finds that states with strong post-Kelo reform laws have not suffered any reduction in growth and development relative to preexisting trends or in comparison with states that passed ineffective reforms or none at all.
I tend to agree with the study's conclusion that takings for economic development aren't actually necessary to increase employment or promote local economic growth. For reasons I outlined in this article, economic development takings are likely to do more harm than good for local economies.
At the same time, I think that the IJ study is not yet a definitive assessment of the economic impact of post-Kelo reform laws. All but one of the laws considered in the study have been in force for less than two and one half years (Utah, which enacted its reform law a few months before Kelo came down on June 23, 2005, is the exception). It is probably too early to fully assess their longterm impact. In addition, while the study controls for preexisting economic trends, it doesn't take account of intervening events other than post-Kelo reform laws that might affect economic development in different regions of the country.
The IJ study is a compelling refutation of the more extreme doom and gloom predictions of Kelo defenders. In my view, time will show that banning economic development takings is a boon for local economies, not a detriment. A few state Supreme Courts, such as Washington's (1959) and Kentucky's (1979), banned economic development takings under state constitutions many years before Kelo; there is no evidence that their actions undermined their states' economies in any way. Development economists have long argued that protecting property rights is a good way to promote growth. If landowners' rights are protected, they are more likely to invest in their properties and establish enterprises that stimulate local economies.
However, it will probably take several years for us to accumulate more definitive data on the impact of post-Kelo reform laws. In the meantime, the IJ study, combined with other available evidence, has shifted the burden of proof to those who argue that economic development takings are an essential tool for promoting local economic growth. It is up to them to show that forcibly displacing homeowners and businesses for the benefit of other private interests really is a good way to promote economic growth.
CONFLICT OF INTEREST WATCH: As longtime VC readers know, I have done considerable pro bono work for IJ, including writing several amicus briefs on their behalf.
Goldstein v. Pataki and the Shortcomings of Kelo:
The US Court of Appeals for the Second Circuit recently decided Goldstein v. Pataki, a case challenging the condemnation of homes and other property in Brooklyn for the purpose of transferring them to developer Bruce Ratner, owner of the New Jersey Nets. Ratner plans to use the land to build a new stadium for the Nets, as well as other facilities, including some 2250 new housing units.
Not surprisingly, the Second Circuit upheld the condemnations. Under Kelo v. City of New London, they had very little choice. As I discuss in great detail in this article, Kelo mandates very broad judicial deference to the government in determining whether a condemnation is a genuine "public use" under the Fifth Amendment. Any potential benefit to the general public is sufficient, even if it is greatly outweighed by the project's cost.
The case nonetheless reveals some of the serious shortcomings of Kelo and related precedents. Goldstein v. Pataki is a correct application of Kelo; it is also an example of the sort of abuse that more robust judicial protection of property rights could prevent.
First, the fact that much of the condemned land is to be used to build a sports stadium raises serious red flags about the true likelihood that the general public will benefit from the condemnation. Numerous studies by economists show that public subsidies for stadium construction create no economic benefits for the general public (see, e.g, this book published by the liberal Brookings Institution).
Second, the court claims that the creation of "affordable housing" for the poor is one of the public benefits to be expected from the project. The project will indeed create some new housing units (in addition to the stadium). However, as the Second Circuit opinion concedes (pg. 15), almost 70% of the new housing units will be "luxury" units for the wealthy, and the remainder is mostly not guaranteed to be ever built and is still intended for the "middle class" rather than the poor. Like the stadium, the housing portion of the project seems likely to be a straight redistribution of wealth from the current residents of the area to the very wealthy Mr. Ratner and the types of wealthy people who will be able to afford to buy the luxury housing he intends to build. To say the least, it is hard to discern any genuine public benefit here.
The Second Circuit also justifies the takings on the basis that they will serve to alleviate "blight." New York City has indeed designated much of the area condemned area as blighted. However, the validity of this designation is debatable at best (the plaintiffs pointed out that much of the land in the area is among the most valuable in Brooklyn). As I discuss in this article, New York is one of many states with a definition of "blight" so broad that it can encompass virtually any property. Even if the area really is "blighted," it doesn't necessarily follow that the current owners and residents should be expelled and their land transferred to a politically powerful developer. Cities have many other options for alleviating genuine blight that do not infringe so greatly on property rights. At the very least, there is no good reason to condemn the 50% of the project area that even the city acknowledges to be free of blight (see pg. 14).
In this case, as in Kelo itself, the court took account of the claimed benefits to the general public, but explicitly refused to consider the massive costs (pp. 13-15). Ignoring cost is a requirement under Kelo. But it is not a good way of determining whether a planned condemnation is actually likely to serve a "public use" - even if "public use" is defined broadly to include indirect public "benefits." Like those in Kelo, the Goldstein takings seem highly likely to create more costs than benefits for the general public. Ignoring costs is a blank check for local governments to undertake condemnations that benefit politically powerful interests while imposing the costs on taxpayers and the politically weak.
Finally, the Second Circuit notes that "Ratner was the impetus behind the [condemnation] Project, i.e., that he, not a state agency, first conceived of developing Atlantic Yards, that the Ratner Group proposed the geographic boundaries of the Project, and that it was his plan for the Project that the ESDC [government agency undertaking the condemnations] eventually adopted without significant modification." The court is probably right to conclude that this is not enough to prove that the taking was a "pretextual" one under Kelo. At the very least, however, such a pattern of events should trigger heightened judicial scrutiny of the government's true purposes in undertaking the condemnation. The fact that this kind of special interest-driven project receives only the most cursory possible judicial scrutiny is one of Kelo's many shortcomings.
Obama vs. Hillary on Subprime Mortgages:
There was an interesting exchange on subprime mortgages between Barack Obama and Hillary Clinton during their last debate. Hillary argued for a mortgage freeze (hat tip: Instapundit):
I think it’s imperative that we approach this mortgage crisis with the seriousness that it is presenting. There are 95,000 homes in foreclosure in California right now. I want a moratorium on foreclosures for 90 days so we can try to work out keeping people in their homes instead of having them lose their homes, and I want to freeze interest rates for five years.
Obama pointed out a serious flaw in her proposal:
On the mortgage crisis, again, we both believe that this is a critical problem. It’s a huge problem in California and all across the country. And we agree that we have to keep people in their homes.
I have put forward a $10 billion home foreclosure prevention fund that would help to bridge the lender and the borrower so that people can stay in their homes.
I have not signed on to the notion of an interest rates freeze, and the reason is not because we need to protect the banks. The problem is, is that if we have such a freeze, mortgage interest rates will go up across the board and you will have a lot of people who are currently trying to get mortgages who will actually have more of a difficult time.
Obama is right to point out that Hillary's proposed mortgage freeze would create perverse incentives. But his own proposal for a bailout has a similar weakness. If the government bails out subprime borrowers and lenders who made bad decisions, that will create incentives for future borrowers and lenders to take unjustified risks of their own. The end result will be a serious moral hazard that leads to overinvestment in overvalued real estate - drawing funds away from potentially more productive uses elsewhere. Both borrowers and lenders will expect the government to bail them out if future risky morgages go into default.
In addition, as I emphasize in this post, a bailout would impose large costs on innocent third parties: the taxpayers. If we genuinely want to prevent unwise mortgage borrowing while simultaneously protecting the interests of future homebuyers and innocent third parties, the right strategy may well be for government to do little or nothing. If both lenders and borrowers have to pay the price for their mistakes, they will be less likely to repeat them.
Is Eminent Domain Turnabout Fair Play?
The Pfizer Corporation played a key role instigating the New London, Connecticut condemnations that led to the Kelo case. Now, some of Pfizer's own property may be on the eminent domain chopping block. The New London Day reports that New York officials may try to condemn a Brooklyn factory owned by Pfizer in order to build "affordable housing" on the site.
The article notes that some New London residents who opposed the Kelo condemnations are happy about Pfizer's predicament. As one of them put it, "Turnabout is fair play."
Her attitude is understandable. But I take a different view. Property rights, like other fundamental rights, must not be limited to those who support them. We don't deny Communists the right of freedom of speech, even though they advocate taking away that very same right from others (and have actually done so whenever they had the chance). Similarly, Pfizer should not be denied the right to property even though they lobbied to take it away from others when it was in the corporation's interest to do so.
It's also worth noting that the proposed Brooklyn condemnation seems extremely dubious. Because the property is currently all owned by one entity, there is no collective action or holdout problem of the sort used to justify the use of eminent domain in other cases. If Pfizer's land really is more valuable to the City as a housing site than in its current use, the government should be able to purchase it through voluntary transactions. The benefits of the new use would be greater than the purchase price. If, on the other hand, city officials believe that buying the land isn't worth the price, that's a sign that society will be better off leaving it to its current use.
The Continuing Columbia Eminent Domain Controversy:
Columbia student Evan Daar has an interesting article about the ongoing controversy surrounding Columbia's efforts to use the threat of eminent domain to condemn property it covets in New York City's Manhattanville area, which is mostly occupied by poor and lower middle class African-Americans. Daar notes that Columbia's plans have attracted protest from across the political spectrum. In my view, rightly so. While the university has backed off its initial threats to have the state condemn residential property, it is still threatening to use eminent domain to condemn commercial property in the area if the owners won't sell "voluntarily" (i.e. - under the threat of condemnation proceedings should they refuse Columbia's purchase offers).
I blogged extensively about this controversy in previous posts (see here and here). In this post, I gave some more general reasons why universities should not be allowed to use eminent domain to acquire property.
Zoning and the Subprime Mortgage Crisis:
Randal O'Toole has an interesting post rounding up evidence showing that zoning and other government land-use restrictions have played a major role in causing the subprime mortgage crisis. Zoning helped cause the crisis in two ways: by artificially inflating the price of real estate, and by increasing the likelihood of a "boom-bust" cycle in real estate prices.
As Harvard economist Edward Glaeser and UPenn economist Edward Gyourko showed in this 2002 paper, restrictive zoning greatly increases housing prices by artificially reducing the amount of land on which new housing can be built and also by reducing the amount of housing that can be built even in those areas where residential construction is permitted. Glaeser and Gyourko show that zoning restrictions account for a high percentage of the total cost of housing in some of the nation's most expensive real estate markets, such as California and the major East Coast cities. O'Toole's post cites more recent research that supports this conclusion (including his own). Higher housing prices helped cause the subprime mortgage crisis by forcing homebuyers to borrow more money in order to purchase homes of a given size and location. If prices had been lower, so too would homeowner indebtedness. Fewer buyers would be on the verge of default as a result of a market downturn; their debt burden would likely be much smaller relative to their income.
More recent research by Glaeser and his colleagues (summarized here) shows that restrictive zoning not only drives up housing prices, but also makes them more volatile. Presumably, this is because zoning makes it more difficult for property owners to make marginal changes in land use in response to market signals, thereby increasing the chance that adjustments will be put off until the housing market actually collapses. Obviously, the sudden nature of the recent market downturn exacerbated borrowers' difficulties in repaying their mortgages.
Abolishing restrictive zoning probably would not eliminate housing bubbles entirely. But it would reduce both their incidence and their severity. Even more important, it would make homeownership far more accessible for the poor and middle class. Rental housing would also probably be less expensive, since rents are in large part determined by land prices.
Unfortunately, it is unlikely that we will see such beneficial policy change anytime soon. Widespread economic illiteracy and political ignorance help ensure that most voters don't realize the connection between high housing costs and zoning. Thus, the general public is unlikely to punish politicians who promote restrictive zoning. Meanwhile, the big current landowners who dominate local government in many areas have a strong incentive to promote zoning policies that keep housing artificially scarce, thereby increasing the market value of their own holdings.
UPDATE: It is telling that none of the presidential candidates who have focused on the subprime crisis have even so much as mentioned restrictive zoning, much less called for its abolition. Their economic advisers are surely knowledgeable enough to understand the connection. But their political advisers know that voters' economic illiteracy will make it difficult for them grasp the point. On the other hand, coming out against zoning would alienate powerful interest groups that benefit from the status quo, such as wealthy landowners in major urban areas with restrictive zoning policies. Just another example of how what the voters don't know ends up hurting them.
Once Blighted, Always Blighted:
One of the many serious problems in current eminent domain law is that many states have definitions of "blight" so broad that virtually any area can be declared blighted and thereafter subject to condemnation whenever local governments want. I have often written about this problem (e.g. - here). A less-recognized, but also serious problem is that once an area is declared "blighted," many state laws allow the designation to persist for decades. Blight designations - and the associated power to condemn property - are allowed to persist even if local conditions change and even if there is no proof that condemnation is actually necessary to eliminate any blight that remains.
As I discuss in my paper on recent eminent domain reform efforts, California is one of many states with a broad definition of blight that allows condemnation of almost any property. However, back in 1993, the state legislature enacted a modest reform law that set a deadline of 40 years or January 1, 2009 (whichever comes later) for the completion of blight redevelopment plans begun before 1994. After the deadline, local governments could not condemn property in the "blighted" area without first getting a new blight designation (which in California is usually easy to do). Indeed, the 1993 law was enacted at the behest of California local governments themselves in order to " stave off more radical" reform efforts.
However, even this modest restriction is now unacceptable to California planning bureaucrats and the private interests that benefit from taking over condemned property in "blighted" areas. As Dan Walters of the Sacramento Bee reports (hat tip: Tim Sandefur), they are trying to get the state legislature to pass a bill to extend the deadline in the 1993 law, so that the over forty year old blight "redevelopment" plans that expire on January 1, 2009 will still be able to license condemnation after that date.
I don't think you have to be a development expert to realize that a redevelopment plan that has failed to eliminate "blight" even after over forty years of trying is probably not going to succeed now. Indeed, long-lasting blight designations are likely to impede development more than promote it. After all, people are likely to hesitate to invest their money in property that could be condemned at any time. Endless blight designations are therefore unlikely to actually help develop communities - even those that are genuinely "blighted" as opposed to merely designated as such under expansive state laws. But permanent condemnation authority is a treasure trove for local politicians. They can use it to transfer condemned property to influential developers and other interest groups that can help them stay in power.
Property Rights Three Years after Kelo I - Why Kelo Was Better than Previous Supreme Court Public Use Decisions:
Three years ago today, the Supreme Court decided Kelo v. City of New London, the case in which it held that the Public Use Clause of the Fifth Amendment does not forbid government to transfer property from one private owner to another in order to promote "economic development." The Court ruled that "economic development" by private parties is a "public use" of the condemned property and therefore such takings are permissible.
Kelo stimulated a broader political backlash than any other Supreme Court ruling in American history. As I documented in this article, the decision was opposed by at least 80% of the general public and was condemned by politicians and activists from across the political spectrum. It also led 42 states and the federal government to enact new laws purporting to restrict eminent domain power - a more extensive legislative response than that generated by any other Supreme Court decision.
The third anniversary of Kelo is an excellent opportunity to assess the state of property rights today. On the whole, I think there has been considerable progress over the last three years, even if not as much as some hoped. The cause of property rights is ultimately better off with the Kelo decision than it would have been without it. In this post, I explain why Kelo, severely flawed as it is, was an improvement over what came before. In followup posts, I will briefly summarize progress in protecting property rights at the state level, and consider the new political alliances for property rights that Kelo made possible.
As I explained in this 2007 Supreme Court Economic Review article, Kelo leaves property owners almost completely unprotected against takings. As such, it was definitely a defeat for property owners. Moreover, the Court also misapplied early twentieth century "substantive due process" cases to falsely claim that there was a 100 years of precedent supporting its conclusion that virtually any taking is permissible under the Public Use Clause of the Fifth Amendment (see pp. 240-44 of the SCER article).
Nonetheless, Kelo was a significant improvement over Hawaii Housing Authority v. Midkiff (1984) and Berman v. Parker(1954), the Court's two previous important Public Use decisions. These two cases had held that any governmental purpose could be a "public use" justifying condemnation so long as it was "rationally related to a conceivable public purpose." By contrast, the Kelo majority opinion imposed a slightly stricter (though still extremely permissive) test on economic development takings and Justice Kennedy's concurring opinion held out the prospect that some takings could be invalidated if there was too much "favoritism" towards private parties (these aspects of Kelo are analyzed in great detail on pp. 227-240 of my SCER article).
Far more important than the majority's insignificant new protections for property owners is the sheer fact that Kelo was a close 5-4 decision in which the dissenters argued that "economic development" takings that transfer property to private parties are categorically banned by the Fifth Amendment. This marks a sea change from the "anything goes" approach unanimously adopted in Midkiff and Berman. Ironically, Justice Sandra Day O'Connor - the author of the Court's ultra-permissive opinion in Midkiff - also wrote the principal dissent in Kelo. In her Kelo dissent, O'Connor event went so far as to repudiate what she somewhat misleadingly called the "errant language" she herself had written back in 1984.
Before Kelo, most experts believed that the Public Use Clause was essentially dead as a meaningful restriction on eminent domain. Since 2005, the issue is once again very much alive. Kelo probably won't be overturned in the near future. But the Court's permissive approach to public use is no longer cast in stone, as most experts believed it was before Kelo.
UPDATE: I have corrected the typo in which I accidentally indicated that Midkiff was decided in 1954 rather than 1984.
Justice Alito and Kelo:
Justice Samuel Alito was not on the Supreme Court when it handed down Kelo in 2005. However, today he revealed that he may not be a big fan of that decision. As Lyle Denniston of ScotusBlog points out, Alito has taken the unusual step of revealing that he voted against the Court's decision to deny a writ of certiorari for Goldstein v. Pataki, the controversial Second Circuit takings case that I blogged about here. As I indicated in my earlier discussion of Goldstein, the taking challenged in that case was clearly permissible under Kelo. Thus, the only likely reason why Alito (or any Supreme Court justice) might have wanted to consider Goldstein would be to overrule Kelo, or at least narrow its scope. Alito's vote to grant cert probably indicates that he at the very least has serious reservations about Kelo.
Moreover, it is extremely rare for the justices to reveal their votes on cert petitions. Alito's decision to break with standard practice in this case suggests that he may have wanted to send a signal about his attitude towards Kelo for the benefit of future litigants.
Whether Chief Justice John Roberts (the other justice appointed after Kelo was decided) shares Alito's views on these issues remains to be seen.
HT: Ilya Shapiro of the Cato Institute, who brought Alito's vote on Goldstein to my attention.
UPDATE: Ilya Shapiro (who, BTW, is not related to me, despite having the same first name), has written a post on this issue here.
Property Rights Three Years After Kelo, Part II - The State of the States:
Since Kelo was decided exactly three years ago, a remarkable 42 states have enacted new eminent domain reform laws - a more extensive legislative response than that generated by any other Supreme Court decision. By my count, at least five state supreme courts have issued decisions limiting takings under their state constitutions, including two (Ohio and Oklahoma) which held that Kelo-style "economic development" condemnations are forbidden under their state public use clauses.
How much real progress has been made in protecting property rights in the states? Not nearly as much as many people hoped, but a lot more than probably would have occurred without Kelo.
I. State Legislation.
I have discussed state post-Kelo legislation in great detail in this article. The article covers all state post-Kelo reforms, except for California's recently passed Proposition 99, which I criticized here, and in several entries in this series of posts.
To briefly summarize my findings, 35 state legislatures have passed eminent domain reform laws since Kelo, and eleven states (including California's Prop 99) have enacted such reforms by referendum (a few states have done both).
However, 21 of the 35 laws enacted by state legislatures only pretend to limit takings and don't impose any real restrictions Kelo-like condemnations. The same is true of four of the 11 reforms enacted by referendum. The most common subterfuge is to ban takings for "economic development" but allow them to continue under another name as "blight" condemnations, utilizing a definition of "blight" broad enough to cover virtually any property.
Moreover, many of the states that have enacted effective reforms are ones that rarely or never engaged in economic development takings anyway. For example, the state of South Dakota has enacted one of the strongest post-Kelo laws in the entire country. But in the years preceding Kelo, South Dakota did not initiate even one blight or "economic development" taking. By contrast, many of the states with the worst records on property rights have enacted ineffective legislation or none at all. These states include California, New York, New Jersey, and Texas. For reasons I advance in the article, the most compelling explanation for this pattern is that most voters lack the knowledge necessary to tell the difference between effective reforms and purely symbolic ones. Survey evidence shows that no more than 13% of Americans both know whether their state has enacted eminent domain reforms since Kelo, and know whether those reforms are likely to be effective or not.
That said, a number of states with extensive records of eminent domain abuse have enacted strong reform laws, with Florida (which adopted the strongest reform in the entire country) and Indiana being the best examples. Moreover, as I explain in the paper, reforms enacted by citizen-initiated referendum initiatives have generally proven far stronger than those enacted by state legislatures (though Proposition 99 - drafted by pro-condemnation interest groups, is an important exception). Thus, the Kelo backlash has led to some important progress in state eminent domain legislation.
It is highly unlikely that any of these states would have moved to curtail eminent domain were it not for Kelo. In the decade prior to Kelo, only one state (Utah) had passed a reform law forbidding economic development takings.
II. Developments in State Courts.
Since Kelo, at least five state supreme courts have banned or limited economic development takings under their state constitutions. Two of these, Ohio and Oklahoma, held that Kelo-like condemnations are categorically forbidden under their states' constitutions. The Ohio case, City of Norwood v. Horney, is particularly important because it addresses blight takings as well as pure economic development condemnations. Significantly, no state supreme court has gone the other way in recent years, with the exception of the Connecticut Supreme Court's narrow 4-3 ruling in Kelo itself.
It is difficult to say whether these state court rulings are a reaction against Kelo or not. Unlike in the case of state legislative developments, recent state supreme court decisions forbidding or restricting economic development takings are a continuation of a preexisting trend. In then ten years prior to Kelo, the supreme courts of Michigan, Illinois, Montana, and South Carolina all held that economic development takings violate their state constitutions, with Kansas being the only state supreme court that ruled the other way during that time. The 2004 Michigan case (which I analyzed in this article), was especially significant because it overruled that court's notorious 1981 Poletown decision, which had upheld the forcible displacement of some 4000 people in Detroit so that General Motors could acquire land for a new factory.
All told, eleven state supreme courts now forbid economic development takings under their state constitutions, and nine of them reached this conclusion before Kelo. However, it is significant that the Supreme Court's ruling in Kelo did not influence state supreme courts to interpret their state constitutions in the same way. Back in the 1950s, the Supreme Court's decision in Berman v. Parker, which held that "blight" condemnations are permissible under the Fifth Amendment's Public Use Clause, helped convince state courts to rule the same way under their state constitutions (as nearly all did). As a result, hundreds of thousands of people were forcibly displaced by "urban renewal" and blight takings during the 1950s and 60s (a history summarized on pp. 268-71 here). By contrast, the Ohio and Oklahoma supreme courts have both repudiated Kelo as a potential guide in interpreting their state constitutions and no other state supreme court has embraced it.
Property Rights Three Years After Kelo, Part III - A New Cross-Ideological Coalition for Property Rights?
One of the most important aspects of the backlash against Kelo was the extent to which the decision was condemned by many on the political left. Conservatives and libertarians have traditionally defended property rights. By contrast, liberals have tended to view them as a subterfuge by which the rich evade government regulations that will supposedly benefit the poor. Yet many liberals and leftists were extremely upset by Kelo. Among those who harshly criticized the decision and "economic development" takings were Ralph Nader, NAACP, the Southern Christian Leadership Conference, Howard Dean, Bill Clinton, and a host of others.. Among the general public, surveys showed that liberals and Democrats opposed Kelo just as overwhelmingly as conservatives and Democrats (see pp. 6-10 of this article). Significantly, many of the liberal critics of Kelo, including the NAACP, AARP and SCLC in their amicus brief, called for a categorical ban on economic development takings, not merely a tightening of standards for such takings. Liberal opposition to economic development takings stems in part from the realization that blight and economic development takings often victimize the poor and ethnic minorities for the benefit of political powerful interest groups.
Kelo therefore created an important opportunity to forge a broad-based coalition in favor of stronger protection for property rights against takings. For the first time since the New Deal, many on the left were aligned with liberatarians on conservatives on a key property rights issue.
To some extent, that coalition has borne fruit in the form of post-Kelo legislative reform in the states (discussed in my last post in this series). State supreme courts in generally liberal states such as Illinois, Michigan, and Washington have invalidated economic development takings under their state constitutions and shown far greater willingness to protect constitutional property rights than their fellow liberals on the US Supreme Court (all four of whom voted with the Kelo majority).
However, I fear that not enough has been done to exploit coalition opportunity presented by Kelo. On the liberal side, those activists and organizations who criticized Kelo have, for the most part, failed to make protection of property rights for the poor a routine element of their agenda. Few of them have pursued other property rights litigation or engaged in lobbying on post-Kelo reform issues. They have criticized Kelo and occasionally filed amicus briefs; but there needs to be more action to match the admirable talk. On the conservative-libertarian side, not enough has been done to reach out to potential liberal allies. Occasionally, as in the case of California Propositions 90 and 98, conservative property rights activists have actively alienated liberals by bundling anti-Kelo measures protections with other agenda items that potential liberal allies were bound to oppose. Both sides of the potential anti-Kelo coalition need to do more to make it happen.
Napoleon once said that he preferred to have allies for enemies, because an alliance has greater coordination problems than a unitary adversary. His point probably applies to political coalitions as much as military ones. Nonetheless, the benefits of building a broad anti-Kelo coalition are worth the cost. American history shows that constitutional limits on government power are rarely secure unless they have substantial support on both sides of the political spectrum. Judicial enforcement of free speech rights, for example, did not become effective until it was accepted by many conservatives, as well as the liberals who initially championed it. For all its flaws, the unwieldy Sixth Coalition eventually defeated Napoleon and packed him off to St. Helena. If we play our cards right, perhaps Kelo will suffer a similar fate.
Property Rights Three Years after Kelo, Part IV - What the Feds Have Done:
My earlier posts on eminent domain reform since Kelo omitted reference to the federal government's reform efforts. In this post, I'm going to rectify that unfair omission. So here's a summary of the federal government's post-Kelo reform successes:
[Insert sound of crickets chirping, grass growing, and paint drying].
The above is a comprehensive summary of federal post-Kelo efforts because the feds have accomplished nothing of any no. On the first anniversary of Kelo, President Bush issued a completely ineffective executive order that seems to have been meant just for show. In 2005, Congress passed the Bond amendment, an almost equally futile gesture that has since expired (described on pp. 41-42 of this article). And that's it.
Such federal neglect of the issue is unfortunate. As I explained in a recent National Review article, there is actually a great deal that the president and Congress can do to curb harmful blight and economic development takings. Many blight and economic development condemnations are at least partially funded with federal grants; and some might not have been undertaken without them. Even if you believe that respect for state autonomy should prevent Congress from simply banning such takings, the federal government surely has the power to deny federal to funds to localities that use them.
The Property Rights Protection Act (discussed on pp. 38-41 of my forthcoming article on post-Kelo reform), which would have taken a step in that direction, passed the House of Representatives overwhelmingly in 2005. It would have denied federal "economic development" funds to local governments that undertake economic development takings similar to that upheld in Kelo. But the PRPA was bottled up in the Senate under the Republican Congress. Efforts to resuscitate it in the new Democratic Congress have so far been even less successful. Recently, a new and somewhat better version of the PRPA has been introduced by Republican Representative John Sullivan. Whether Sullivan's effort meets with greater success than previous attempts remains to be seen. As a general rule, it's rare for any important measure to pass the House if it is introduced by a member of the minority party.