feature

By Emily Landes

Three years ago, no one wanted to talk about eminent domain—the government’s ability to force the sale of private properties for the greater public good. Then, in June 2005, the United States Supreme Court announced its 5-4 decision affirming that eminent domain could be used not just for “public use,” as is specified in the Constitution, but for “public purpose” as well. The implication is that eminent
domain can be used to take private property not just to build roads, schools or parks, but to build company headquarters, shopping malls and other private developments that could be considered an improvement to the community. In an instant, eminent domain became one of the hottest topics for the property rights community and set off a national firestorm of controversy, pitting private citizens against their local governments.

At press time, 41 states had enacted legislative measures that attempt to reform eminent domain. Several will address the issue on their ballots in this election year, including California’s Propositions 98 and 99. But these dueling propositions have proven to be almost as controversial as the Supreme Court’s decision; property owners groups support Prop. 98, claiming it is the only initiative that will truly end eminent domain abuse and protect property owners, while tenants support Prop. 99, a far less encompassing initiative that only applies to owner-occupied single-family homes and condos.

The Decision
The case that brought eminent domain back to the forefront of the political landscape was Kelo vs. City of New London—a legal fight that pitted homeowner Susette Kelo against New London, Connecticut, which attempted to use eminent domain to take Kelo’s little pink cottage in the name of greater economic development. The city launched its redevelopment plan in 1998 after pharmaceutical company Pfizer decided to build a plant in the Fort Trumbull area of the city. The area was considered economically depressed, and the city saw an opportunity to build on the new jobs and high visibility Pfizer would bring. City officials decided to redevelop the area with a resort hotel and conference center, a new state park and retail and office space.

The city turned to the New London Development Corporation, a private company under the control of city government, to plan the redevelopment. It was able to buy 100 of the 115 commercial and residential lots needed for the redevelopment to take place. Fifteen owners, including Kelo, didn’t want to sell, so the city used eminent domain to condemn the holdouts’ lots. The owners sued the city in the Connecticut courts, saying that the government had abused its eminent domain power. The Supreme Court took up the case in 2005; it was the first eminent domain issue heard by the court since 1984.

On June 23, 2005, the court decided 5-4 in favor of New London. Justice John
Paul Stevens wrote the majority opinion (joined by Justices Anthony Kennedy, David Souter, Ruth Bader Ginsburg and Stephen Breyer), which stated that the city should be given a wide breadth of opportunities, including new jobs and tax revenue, to seize land if it benefits the community. Regardless of the fact that eminent domain had largely been used for public projects historically, Justice Stevens argued that there was “no principled way of distinguishing economic development from the other public purposes that we have recognized.” Justice Sandra Day O’Connor wrote the dissenting argument (joined by Chief Justice William Rehnquist and Justices Clarence Thomas and Antonin Scalia); she worried that the majority’s decision would allow big corporations to take land from small property owners if they do so in the name of “public purpose.”

After the Kelo decision, most of the remaining holdouts sold their properties to the city. Susette Kelo continued to fight the decision until the summer of 2006, when the city agreed to move her cottage to another area in the city. Ironically, this is the solution Kelo had suggested herself when the city first approached her about selling her property more than five years before.

The Fallout
Of course, by now, the Kelo decision has become about much more than saving one woman’s cottage. The decision was hugely unpopular (most national polls placed the disapproval rate between 65% and 97%) and quickly became a lightening rod for property rights activists. Legislatures in a majority of states have passed laws designed to blunt the government privilege affirmed by Kelo, and a handful are currently debating the issue in their legislatures. A wide variety of municipal measures on the local level that curb eminent domain have been passed as well. It is important to note that none of these legislative changes have attempted to alter the way eminent domain is used for public works like parks or roads; the outrage and subsequent legislation is all directed toward the government’s ability to take private land for projects that even partially benefit private groups.

Lower courts have also weighed in against the liberties granted to governments by Kelo. The Ohio Supreme Court, the first of the state high courts to take up the decision, ruled unanimously that a Cincinnati suburb could not take the homes from a few holdouts to build a $125-million redevelopment project containing offices, shops and restaurants in a depressed neighborhood. The court said that economic factors should be considered when determining if eminent domain can be used, but that it should not be the only support for the decision.

In addition to new legislation and court decisions that speak to the continuing anger about Kelo, many states have had initiatives to protect homeowners from eminent domain abuse on their ballots. These measures are largely found in Western states, where land-use regulations are often the toughest and land, therefore, comes at a premium. California is no exception. Two eminent domain measures will be on the state’s June ballot—one a narrow measure that simply curtails the government’s ability to take owner-occupied homes for private gain and the other a wide-reaching initiative that not only contains the prohibitions of the other measure, but also applies to all privately held properties and begins the phase out of rent control throughout the state.

A Closer Look at the Propositions
Interestingly, both Prop. 98 and Prop. 99 appear to support some form of eminent domain reform, and both measures still allow the government to take property for public facilities. It is the phasing out of rent control in Prop. 98, also known as the California Property Owners and Farmland Protection Act, that has been the source of most of the controversy.

Prop. 98 is sponsored by the Howard Jarvis Taxpayers Association, and its drafters believe that the government can “take” property in two ways: by using eminent domain to deny ownership and by using rent control laws to deny owners the ability to set a market-rate rent. However, should Prop. 98 pass, it will not affect any current tenants. Instead, once the tenant vacates the property, the rent can be restored to market rate and the unit will be decontrolled from that point on.

Prop. 98 also disallows the use of eminent domain for all privately held property, including commercial properties, farms and places of worship, if the government plans to use that property for private development. If such a property is taken for a public use, Prop. 98 entitles business owners and farmers to compensation for temporary business losses, relocation expenses, business reestablishment costs and other reimbursements. Because of this pro-business stance, it has been endorsed not only by a number of property rights organizations, but also taxpayer groups, farming associations and chambers of commerce.

Prop. 99, sponsored by the League of California Cities, provides voters with an eminent domain reform measure that does not affect rent control and only protects single-family homes that have been owner-occupied for at least one year. Its reforms do not apply to small businesses, farms or places of worship.
It is the choice of tenant advocates throughout the state, and has also been
endorsed by several labor and senior groups. Prop. 99 supporters also include a number of environmental groups, due to the fear that Prop. 98 could affect cities’ land-use decisions. Prop. 98 supporters deny this claim.

Both sides acknowledge that California is an influential and important battleground in the fight over eminent domain. It appears that even if the Supreme Court decision brought eminent domain back into the spotlight, the voters’ ruling in June may be an even more important contribution to the national debate over property rights.

But what happens if both measures pass? Prop. 99 contains a provision stating that if it passes with more votes than Prop. 98, the latter would be nullified. Therefore, voter turnout will be a critical factor and both sides are working overtime to get their supporters to the polls on June 3.

For more information on Prop. 98, check out yesprop98.com and for more
information on Prop. 99, check out www.eminentdomainreform.com.

---

The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of SFAA or SF Apartment Magazine. Emily Landes is the managing editor of Rental Housing and SF Apartment Magazine. Copyright © 2008 by SF Apartment Magazine. All rights reserved.