The Limits of Anti-Kelo Legislation - Reformers are trying to outlaw eminent domain abuse. But will the laws they're passing be effective?

Ilya Somin | Aug./Sept. Print Edition 2007
Reason Magazine

In Kelo v. City of New London (2005), the U.S. Supreme Court allowed the government to condemn property and transfer it to other private owners in the name of "economic development." Upholding the forced transfer of land in New London, Connecticut, to private developers, the Court ruled that virtually any potential public benefit satisfies the Fifth Amendment's requirement that the authorities can take property only for a "public use." Traditionally, a public use had meant a government-owned facility or a public utility with legally mandated access for the general public. With an economic development taking, property is simply transferred from one private party to another, without any public access requirement. Although the traditional definition of public use had already been vastly expanded by previous decisions, Kelo drove the change home to the general public.

The ruling generated more and broader opposition than any other Supreme Court decision of the last several decades. A 2005 survey by the Saint Index, a polling organization specializing in land use issues, showed that 81 percent of Americans opposed Kelo, a backlash that cut across traditional partisan, ideological, and racial lines. Eighty-five percent of Republicans opposed Kelo, but so did 79 percent of Democrats and 83 percent of independents. The decision was likewise opposed by 82 percent of whites, 72 percent of blacks, and 80 percent of Hispanics.

Politicians on both the right and the left hurried to condemn the Court's ruling. Though the decision was supported by all the liberal justices and opposed by most of the conservatives, Democratic National Committee Chairman Howard Dean denounced "a Republican-appointed Supreme Court that decided they can take your house and put a Sheraton hotel in there." California Democratic Rep. Maxine Waters, a prominent African-American liberal, called Kelo-style takings "the most un-American thing that can be done." On the other end of the political spectrum, the conservative talk show host Rush Limbaugh condemned the decision for letting the government "kick the little guy out of his and her homes and sell those home[s] to a big developer."

Many observers expected the backlash to prompt legislation that would make judicial protection against economic development takings unnecessary. In a fall 2005 Harvard Law Review article, federal appeals court judge Richard Posner, arguably the nation's most respected judge and most prominent legal scholar, wrote that the political response to Kelo is "evidence of [the decision's] pragmatic soundness." Judicial action would be unnecessary, Posner suggested, because the political process could take care of the problem. In his confirmation hearing before the Senate, future Supreme Court Chief Justice John Roberts said that the public reaction to Kelo shows that Congress and state legislatures "are protectors of the people's rights as well" and "can protect them in situations where the Court has determined, as it did...in Kelo, that they are not going to draw [the] line."

Although important progress in protecting property rights has been made in some states, such predictions turned out to be seriously overstated. The Kelo backlash has not been as effective as many expected. Too often, cosmetic changes have taken the place of real reform.

Flawed Reforms in the States
Nearly every state legislature has either adopted or considered legislation to curb the use of eminent domain since Kelo, but only 14 have enacted laws that provide significantly increased protections for property rights. Several other states have enacted effective reforms by popular referendum. Seventeen state legislatures have passed laws that purport to restrict eminent domain, but in reality accomplish very little.

Legislators have found many different ways to produce bills that appear to protect property rights without actually doing so. Texas, for example, banned "economic development" takings but continues to permit them under other names, such as "community development." The most common tactic, used in some 16 states' post-Kelo laws, is to allow economic development condemnations to continue under the guise of alleviating "blight." While it may sometimes be desirable to use eminent domain to transform severely dilapidated areas, many states define "blight" so broadly that almost any neighborhood qualifies. A 2003 Nevada Supreme Court decision concluded that downtown Las Vegas was blighted, thus allowing the authorities to condemn some property that local casinos coveted for a new parking lot. A 2001 New York appellate decision held that Times Square was blighted, paving the way for the condemnation of property to build a new headquarters for The New York Times.

Unsurprisingly, the states most in need of reform tended to be the ones least willing to adopt it. Consider the 20 states that have the largest numbers of Kelo-like condemnations, according to data compiled by the Institute for Justice, the public interest law firm that represented the property owners in Kelo. (Full disclosure: I have worked with the Institute for Justice on several cases and authored an amicus brief in Kelo.) Thirteen of them have enacted either ineffective legislation or none at all. Two states with otherwise effective reforms exempted the areas where most condemnations occur. Pennsylvania's reform includes a five-year exemption for Philadelphia and Pittsburgh, and Minnesota's exempts the Twin Cities area, also for five years. By the time these exemptions expire, the political uproar over Kelo likely will have subsided, making it easier to extend them without much public scrutiny.

The same pattern holds in those states with the largest numbers of "threatened" condemnations to transfer property from one private party to another. In these cases, the government used the possibility of condemnation as leverage to force owners to sell but did not actually go through with a taking. Fourteen of the top 20 states on that list have failed to enact reforms that significantly constrain Kelo-like takings. Major states with extensive records of eminent domain abuse that have failed to enact effective reforms include California, New York, New Jersey, and Texas.

Federal Reform Efforts
Similar shortcomings have bedeviled reform efforts at the federal level. An executive order issued by President Bush in June 2006, for example, banned federal agencies from using eminent domain solely for "private development" but allowed takings for private owners who promise to use the land for both private and "public" development. Since the Supreme Court in Kelo upheld the New London project partly because the city claimed its takings would benefit the public by raising tax revenues and stimulating the economy, Bush's order does little to limit the decision's reach. Virtually any economic development taking can be rationalized on the ground that it might benefit the public as well as the new owner. This is the exact argument that the Supreme Court majority endorsed in Kelo itself. Since most takings are initiated by state and local governments rather than by federal officials, even a better-worded presidential order would have had only limited effect.

The Bond Amendment, introduced by Sen. Kit Bond (R-Mo.) and enacted by Congress in 2005, has been similarly ineffective. While the Amendment purports to withhold federal funds from state and local development projects that use Kelo-style condemnations, it applies only to takings that "primarily benefit...private entities." Like Bush's executive order, it can be easily circumvented simply by claiming the project in question benefits the general public. It also specifically exempts condemnations intended to alleviate "blight." As already noted, broad blight designations are often used to legitimate what are in reality economic development takings.

In November 2005, the House of Representatives overwhelmingly approved the Private Property Rights Protection Act, a measure that would deny federal "economic development" funds to state and local governments that engage in Kelo-like takings. The bill might have been at least somewhat effective if enacted. Although its coverage extended to less than 2 percent of federal funds flowing to state and local authorities, it might have had a significant impact on jurisdictions with an unusually heavy dependence on federal economic development funds.

Unfortunately, the measure was bottled up in the Senate by Judiciary Committee Chairman Arlen Specter (R-Pa.) and eventually died there. In May of this year, the House Agriculture Committee of the new Democratic-controlled Congress approved a similar bill. Even if it passes the House, which at press time had not yet voted on the bill, its fate in the Senate is uncertain at best, since most Democratic senators had acquiesced in tabling the earlier legislation.

The Impact of Political Ignorance
Why has the Kelo backlash fallen short in so many legislatures? Some blame the developers and local politicians who benefit from condemnations. Those groups have indeed spearheaded opposition to reform. But their efforts do not by themselves explain how narrow interest groups could overcome the opposition of the vast majority of the electorate. According to the 2005 Saint Index poll, 63 percent of Americans not only opposed economic development takings but opposed them "strongly." In a 2006 Saint Index survey, 71 percent of respondents supported laws banning condemnations for "private development," and 43 percent "strongly" supported such reforms. If even 10 or 15 percent of those voters who say they "strongly" support banning economic development takings would be willing to change their votes based on the issue, they would be a voting bloc constituting about 4 percent to 7 percent of the electorate. That is more than enough to swing many close races, and is probably enough to outweigh the political influence of those developers and local officials who support sweeping eminent domain authority.

The main reason public opposition to Kelo has not had more impact on policy is probably public ignorance. It takes specialized knowledge to distinguish an effective "anti-Kelo" bill from one that is mostly for show. Most voters lack both the ability and the incentive to scrutinize such details closely. Surveys consistently show that most citizens are ignorant of even basic facts about politics and public policy, and eminent domain is unlikely to be an exception to this rule. To take one of many examples, a poll taken not long before the 2004 elections found that 70 percent of the public was unaware of the recently approved Medicare prescription drug benefit, the largest new domestic program in almost 40 years.

Developers and other interest groups, by contrast, have much greater incentive to inform themselves about the details of pending legislation. Thus, politicians can appease voters angry about Kelo by passing laws to "reverse" it, while simultaneously avoiding the ire of development interests by not giving those laws teeth. This dynamic may get stronger as the anger generated by Kelo wanes and public attention shifts to other issues.

The Referendum Exception
Political ignorance helps explain why post-Kelo reforms enacted by referendum generally have been more effective than those enacted through the legislative process. In 2006 voters in 12 states considered ballot initiatives to ban or curtail the condemnation of private property for economic development. Ten of the 12 passed, all by lopsided margins, with support ranging from 55 percent to 86 percent. The only two that failed were proposals in California and Idaho that were tied to complex and controversial "regulatory takings" reforms that might have curtailed a wide range of government actions. Even so, the California reform proposal nearly passed, losing by a narrow margin of 52 percent to 48 percent. Of the 10 initiatives that did pass, at least six (in Arizona, Florida, Louisiana, Nevada, North Dakota, and Oregon) and probably a seventh (in Michigan) are worded strongly enough to provide real protection for property owners beyond that provided by pre-existing law.

Referendum initiatives tend to be more effective than legislative reforms because they usually are drafted by activists instead of politicians. That is a tendency, not an absolute rule: Some state legislatures have enacted strong reforms. Several of these states had made little or no use of economic development takings-New Mexico, South Dakota, and Wyoming enacted very strong post-Kelo reforms despite (or perhaps because of) the fact that they had not recorded a single Kelo-like condemnation in recent years. Still, several state legislatures that passed effective reforms had made fairly extensive use of economic development takings. Notable examples include Florida (which enacted the strongest reform legislation of any state), Indiana, and Virginia.

Unlike state legislators, property rights activists do not need to appease powerful pro-condemnation interest groups. They therefore have little incentive to exploit political ignorance by passing off cosmetic legislation as meaningful reform. Of the six post-Kelo initiatives that will probably prove effective, four were drafted by property rights advocates in states where referendum questions can be put on the ballot without first being approved by the state legislature. By contrast, the three relatively ineffective new laws approved by referendum were submitted to voters by state legislatures and suffered from the same flaws as other legislative reforms. The truly meaningful difference is not so much that between referenda and ordinary legislation as that between citizen-initiated referenda and all types of reform that require legislative approval.

Political ignorance also helps explain why the backlash against eminent domain occurred when it did. Many Kelo defenders complain that the backlash is grossly excessive because the case made little change in existing precedent. In two previous decisions, Berman v. Parker (1954) and Hawaii Housing Authority v. Midkiff (1984), the Supreme Court already had ruled that the government could condemn property for almost any reason, even if the land taken was to be transferred to private parties. In the years since Berman upheld "blight" condemnations, hundreds of thousands of people have been forcibly expelled from their homes as a result of economic development and "urban renewal" takings. And in Midkiff, a unanimous Court held that the government could take property for any reason that is "rationally related to a conceivable public purpose," which can mean almost anything.

While policy makers and other experts were well aware of these facts, ordinary citizens probably were not. For most, the extensive publicity surrounding Kelo was probably the first time they realized that private property, including homes, could be condemned and transferred to other private entities just to promote "economic development."

Even if they had been aware of Berman and Midkiff, voters might not have realized that those earlier decisions gave the government a blank check to condemn virtually any property for virtually any reason. Berman upheld the condemnation of property in Washington, D.C., that was "blighted" in the layperson's sense of the word: dilapidated, dangerous, and disease-ridden. Midkiff approved a complex Hawaii land reform scheme that sought to condemn the property of a small number of wealthy landowners so it could be transferred to tenant farmers. Few ordinary citizens, even among those who remembered these cases, were likely to understand that the reasoning behind them was broad enough to justify condemnation of property for reasons that went far beyond the specific facts of the two decisions. Kelo defenders were right to claim that the decision made little change in existing precedent. But they were wrong to assume that the general public knew about and approved of the pre-Kelo status quo.

Prospects for the Future
Referenda may often be preferable to legislative reforms, but they are far from a panacea. Several of the initiatives enacted last fall are flawed, and 26 states do not permit lawmaking by referendum at all. There is also the danger that pro-condemnation forces will use the referendum process for their own purposes. The California League of Cities (CLC), a coalition of local governments seeking to preserve their power to condemn property, is trying to place an essentially meaningless eminent domain "reform" on the state's November ballot as a way of pre-empting a stronger referendum initiative sponsored by property rights advocates. The CLC initiative cleverly includes a provision stating that it would supersede any other eminent domain referendum enacted on the same day, so long as the latter gets fewer votes than the CLC proposal.

The cities' effort may well succeed, since few voters are likely to oppose the CLC-sponsored initiative; after all, on its surface it seems to provide at least some protection for property rights, a goal most voters favor. Even if that protection is insufficient, voters are unlikely to realize that the initiative will actually harm property owners rather than help them. The CLC effort offers additional evidence that at least some opponents of meaningful eminent domain reform are trying to exploit political ignorance for their advantage.

The political response to Kelo has led to some important reforms. But it has also produced many ineffective or meaningless laws. The reaction to Kelo is a striking example of a public backlash against an unpopular judicial decision. But it also shows that backlash politics has its limits.

Ilya Somin, an assistant professor of law at George Mason University, has written several pro bono amicus briefs in takings cases for the Institute for Justice, the public interest law firm that litigated the Kelo case. He also wrote an amicus brief in Kelo itself, on behalf of the late urban policy theorist Jane Jacobs. He blogs at volokh.com.