Kelo and its discontents: the worst (or best?) thing to happen to property rights.

• Author: Lopez, Edward J.
• Position: Kelo v. City of New London

The U.S. Supreme Court's 5-4 decision in the property-rights case Kelo v. City of New London ignited more controversy than any issue decided during the court's 2004-2005 term--more than medicinal marijuana (Gonzales v. Raich), peer-to-peer file sharing (MGM v. Grokster), federal sentencing guidelines (U.S. v. Booker), and two decisions on the public display of the Ten Commandments (McCreary County v. ACLU and Van Orden v. Perry). (1) Seldom has a Supreme Court decision provoked such impassioned reactions from all levels of government and every ideological quarter as did Kelo's apparent green fight to a Connecticut local government to seize fifteen homes in trying to turn around a failing local economy.

The reactions were immediate, widespread, and intense. The U.S. House of Representatives condemned the Kelo decision. Libertarians and property advocates lamented the end of private property. Political liberals decried the unjust effect on low-income populations. Newspaper editorial boards across the nation denounced the decision as an unfair invitation to abuse by local authorities. Justice Sandra Day O'Connor, in her dissenting opinion, famously and bleakly remarked, "Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory" (Kelo v. City of New London, 125 S. Ct. [2005], at 2676). The Kelo ruling hovered like a dark, ominous cloud over property rights.

Did Kelo truly unleash the power of local governments, raising the specter of an end to private property? Or did the decision set in motion a process of institutional change that will ultimately rein in local governments and lead to even less use of eminent domain? If the latter upshot eventuates, then the discussion takes on a profoundly ironic twist. Might Kelo be the best thing that ever happened to property owners?

In this article, we survey developing events at the state and local levels in the year following Kelo, examining the data from the perspective of economic efficiency and constitutional political economy. On the one hand, much evidence suggests that Kelo has had an "opening the floodgates" effect, emboldening local policymakers to act more aggressively in acquiring private property for economic development. On the other hand, a competing hypothesis postulates a "backlash and spotlight" effect, whereby public opinion is swinging heavily in favor of property owners so that local policymakers fear negative publicity and prolonged legal battles, and the states are feverishly enacting legislation to restrict the use of eminent domain. Kelo ignited a struggle for power among voters, developers, local policymakers, and state governments. In this struggle, states are experimenting with how to achieve the balance of power best suited to meet their unique needs, and property owners are gradually securing a stronger foothold under measures enacted by the state legislatures than they would have had under Kelo.

The End of Private Property

The Kelo decision has suffered no shortage of critics and doomsayers decrying the end of private property. Observers of all ideological stripes launched fierce, often emotional reactions at the Kelo court. In an editorial titled "Eminent Latitude," the Washington Post called the Kelo decision "quite unjust" (2005). Similarly, the Sacramento Bee likened the decision to a regressive tax, saying "the history of government takings of private property shows that most often it takes from the poor, or the weak, and gives to the rich and the powerful. And the Supreme Court has just made that even easier" (Weintraub 2005).

Prominent bloggers and policy wonks contributed heavily with their own form of rapid response. Time blogger Andrew Sullivan pulled no punches, writing, "[N]ow you can have your property stolen by Walmart and be unable to get any recompense either, as long as your local representatives, financed by the real estate lobby, go along. Is this an unfree country or what?" (2005). On the same note, Will Collier for Vodkapundit.com wrote, "[P]roperty rights have ceased to exist in the US" (2005), and free-market philosophy professor Tibor Machan lamented, "[I]ndividual rights are legally dead" (2005). With some resignation, economist and Marginal Revolution blogger Tyler Cowen summed up the decision: "this is just awful" (2005).

Attorneys for the petitioners echoed these remarks. Dana Berliner of the Institute for Justice, which represented Susette Kelo, said in a press statement: "It's a dark day for American homeowners. While most constitutional decisions affect a small number of people, this decision undermines the rights of every American, except the most politically connected. Every home, small business, or church would produce more taxes as a shopping center or office building. And according to the Court, that's a good enough reason for eminent domain" (Institute for Justice 2005).

Such biting criticisms appeared seemingly everywhere; in fact, the Kelo majority needed only to visit their colleagues' chambers to hear the worst. Two dissenting opinions, one each from Justice Sandra Day O'Connor and Justice Clarence Thomas, were as critical as those any journalist, scholar, blogger, or politician could muster. Wrote Justice O'Connor of the decision:

Today the Court abandons this long-held, basic limitation on government power [not to take property from A and give it to B]. Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded--i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public--in the process. To reason, as the Court does, that the incidental public benefits resulting from the subsequent ordinary use of private property render economic development takings "for public use" is to wash out any distinction between private and public use of property--and thereby effectively to delete the words "for public use" from the Takings Clause of the Fifth Amendment. Accordingly I respectfully dissent. (at 2671) In a separate dissent, Justice Thomas characterized Kelo as releasing a "boundless use of the eminent domain power" (at 2687).

From the preceding and countless other negative responses to Kelo, one might conclude that it is the worst thing ever to happen to property rights. Is it the end of private property? On its surface, perhaps it is because it further obscures the Fifth Amendment's public-use test, which was already a fuzzy, curvy line. Under Kelo, that line can be drawn wherever a majority city council wishes to draw it. Moreover, the preceding reactions suggest that little in the U.S. government can constrain the vast takings power. A declaration of blight is a precondition of an eminent-domain taking in most states. However, what is to stop cities such as San Jose from declaring one-tenth of the city blighted, just in case the city wants it for redevelopment (Berliner 2003, 22)? Why would states such as New York not transfer land from long-time owners to new developers who promise jobs and higher tax bases (Welch 2005b)? What can stop the eminent-domain floodgates from opening?

Emboldened Local Governments: Opening the Floodgates

Welcome to Small City, U.S.A., where citizens are the politicians, and the local paper is the only press at city hall--places such as Riviera Beach, Florida; Yolo County, California; and Sussex, New Jersey. They used to be quiet and left alone, but after Kelo, their city council chambers have standing room only, and their stories have flown over the Internet before the final gavels have struck. These stories and their counterparts in big cities tell us how Kelo has emboldened local authorities to implement more aggressive land-use policies.

In Hercules, California, for example, on May 23, 2006, the city council voted unanimously to seize property acquired by Wal-Mart, to prevent the retail giant from opening a store in town. An hour's drive away, in Yolo County, the government exercised its right of eminent domain on a 17,300-acre ranch whose rightful owners had planned to develop small segments of the property while conserving the rest. According to the Sacramento Business Journal, county authorities had not released a development plan but wanted to "preserve the ranch as open space and farmland, and to retain its vast natural resources including water rights, natural gas and flood-control capacity" (Anderson 2005). The Orange County Register editorialized: "Taking more than 17,000 acres for unclear reasons is a far cry from the taking of a narrow piece of land to make way for a freeway or courthouse. It shows the degree to which governments perceive themselves as economic central planners, rather than agencies that set some ground rules and enforce people's rights" ("Latest Front" 2006).

Not surprisingly, most of the emboldened central planning emerged in states whose courts interpret public use broadly or whose legislatures define blight vaguely. According to the New York Times, "Nine state supreme courts, including those in Illinois, Michigan and Washington, have forbidden the use of eminent domain simply to bring in more revenue and jobs. New York's highest court, the Court of Appeals, has allowed such condemnations. The New Jersey courts have not ruled on the issue" (Salzman and Mansnerus 2005).

Ironically, the Times itself stands to benefit from New York's lax law. By late 2006, the New York Times Co. was scheduled to complete construction of its sparkling new fifty-two-story headquarters on Eighth Avenue across from the Port Authority bus terminal, on the edge of the neighborhood long known as Hell's Kitchen. Designed by the postmodern architect Renzo Piano, the elegant skyscraper will "transform the dowdy block and generate millions of dollars in tax revenues," according to an August 2002 Times story (Vagli 2002, 3). The...