Eminent domain: Drawing the line on property rights

November 10, 2009

In 1998, Susette Kelo bought a small house overlooking the Thames River in New London, Connecticut's Fort Trumbull neighborhood -- an untidy, mostly residential section of the city. The following year, the city of New London unveiled plans to redevelop the area. Replacing the older homes would be a waterfront village of offices, research laboratories, luxury condominiums, and a hotel.

About 80 homeowners voluntarily sold to the city, but there were a handful of holdouts, led by Susette Kelo, a divorced nurse. When a city-chartered redevelopment agency moved to seize the properties through eminent domain, Kelo, backed by the advocacy group Institute for Justice, fought back in court. The case made its way through the state and federal courts to the US Supreme Court, which on June 23, 2005, ruled in favor of the city.

The city of New London thus had the green light to seize the properties of Kelo and her neighbors and then transfer the properties to new private owners. The city's goal was to make the area a prosperous showplace that would generate new taxes and jobs. But the plans later fell through, and four years after the court's decision, Susette Kelo's former property remains empty.

The right to own private property is a fundamental aspect of the constitution. But, the clause in which it is said property cannot be taken unless the owner is compensated has enabled governments to stretch what the founders intended.

"Property rights have been altered to the point where the government can take any property it wants for any public good," says economics Professor William Boyes. "They can take it and give it to somebody else if they want to now. That's what the New London case was all about."

Economics Professor Allan DeSerpa agrees. "This was pretty much the U.S. Supreme Court saying that state courts can do almost anything they want," he says.

A judicial ruling and a political backlash

But while Kelo v. New London may have important legal precedents surrounding eminent domain, the policy issues regarding private property rights remain very much in play today.

The Supreme Court is not the sole arbiter of limits on private property. In America's federal system, with its separate branches of government, power also resides in Congress, the president, state legislatures, mayors, city councils, and the people, through their actions in the voting booth. The Supreme Court's Kelo decision drew strong public opposition, and other elements of government responded. As a result of these actions, government agencies in many places find it harder to seize private property than they did before Kelo.

"There was back draft from the New London case," Boyes says. "A lot of people were very upset about it. Eminent domain taking may not be as prevalent as it was."

The U.S. Supreme Court has not reconsidered Kelo or taken up other eminent domain cases. New members of the court appear disinclined to overturn the ruling. "I don't see anything changing with the court in the future," says DeSerpa. "It's the backlash that is happening."

Congressional leaders were among the first to protest the ruling. "The only silver lining to this decision is the possibility that this time the court has finally gone too far and that the American people are ready to reassert their constitutional authority," then-House Majority Leader Tom DeLay of Texas said the day after the court ruling. The House quickly adopted a ban on use of federal funds for improvements on land taken by eminent domain taking. A year later, on the anniversary of Kelo, President George W. Bush issued an executive order forbidding federal agencies from using eminent domain solely for the benefit of private interests.

Most eminent domain takings in the United States are made by state and local agencies and not the federal government. Thus, it was at the state level where the most important changes were adopted in response to the high court's ruling. Since Kelo, 37 states have adopted new restrictions on eminent domain, most of them aimed at state and local redevelopment agencies.

While most of those restrictions came from state legislatures, some also were adopted by voters in referendum questions and others were handed down by state courts. Some of the measures barred takings in order to transfer property from one private owner to another. Other measures restricted takings to those intended to eliminate blight.

Crossing ideological lines to support private property

The constitutional underpinnings of private property rights are found in the Fifth Amendment in the Bill of Rights. It states that "No person shall be…deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."

In Kelo, the Supreme Court held that the Constitution does not prohibit government takings as long as a public purpose, defined as such by the government, is involved. "The U.S. Supreme Court doesn't so much pronounce on the issue itself but is deferring to the states," DeSerpa says.

Eminent domain takings are usually not controversial when they are conducted for public projects, such as highways, railroads, or water supplies. But when governments take private property for projects that involve private interests -- as most redevelopment projects do -- many people object.

The issue cuts across ideological lines, and conservatives are not the only ones opposing the government seizures. Among the organizations that supported Susette Kelo before the high court were AARP, the NAACP, and the Southern Christian Leadership Conference.

"A lot of people who consider themselves liberals still believe that homeownership is pretty sacred," DeSerpa said.

The Kelo case continues to motivate supporters of private property rights. A sympathetic book about Susette Kelo's struggles, The Little Pink House, was published in 2009, drawing new publicity to the case. And the former site of her house, which has been relocated, remains a vacant lot.

"The striking thing about the New London case is they still haven't developed that property," says DeSerpa. "They trashed the homes and no public purpose was served at all."

An owner who refused to sell

Arizona has been a battlefront in matters of private property rights. Several years before the Kelo controversy, the city of Mesa moved to take Bailey's Brake Shop, a privately owned business, to make way for a new hardware store at a prominent location in the city. Randy Bailey, owner of the auto repair shop, had refused to sell, prompting the city to invoke eminent domain. Bailey lost in superior court, but the Arizona Court of Appeals reversed the decision, halting the city taking.

"The Arizona court would have nothing of the idea of transferring property from one private use to another," DeSerpa says. "It was an affirmation of the very strong commitment that Arizona has to private property."

In 2006, in the wake of the Kelo decision, Arizona voters approved a proposition called "Private Property Rights Protection Act", which prevents government from using eminent domain to benefit private parties. The proposition also set limits on what some consider government taking by regulation. Under the measure, the government must reimburse property owners when regulations result in a decrease in the property's value.

"Regulation that goes too far constitutes a taking," says Boyes. "Government can regulate private property out of existence without having to pay the compensation."

Limits on property rights also can arise when the government is willing to pay compensation, according to Boyes.

"The value of a home to an individual could be extremely high compared to the value of that home to the government," Boyes notes. "Some people just don't want to move, but the government will just take it and give the owner what the government thinks it's worth."

Bottom line:

  • In its 2005 decision Kelo v. City of New London, the US Supreme Court upheld the right of government agencies to take private property and transfer it to another private owner if the public interest is involved.
  • The Kelo case sparked a public backlash. Some 37 states strengthened private property laws after the court ruling.
  • Support for private property rights often cuts across ideological lines. While conservative groups opposed the New London takings, so too did the NAACP an the AARP.
  • In the Bailey's Brake Shop case, the Arizona Court of Appeals halted the city of Mesa's taking of a privately owned auto repair shop, where another private owner wanted to open a hardware store.