The Volokh Conspiracy

The city of Allentown, Pennsylvania plans to use eminent domain, or at least the threat of it, to forcibly acquire downtown property for the construction of a minor league hockey arena [HT: my father-in-law Bruce Schmauch, a longtime Allentown resident]:

It was drop-the-gloves time in Allentown City Council chambers Wednesday night.

A parade of downtown merchants, their attorneys and supporters laid into city officials, saying their heavy-handed efforts to pressure them into selling their properties under threat of eminent domain to make way for a hockey arena would kill their livelihoods.

That didn’t stop council from voting 6-1 to authorize city officials to use eminent domain to acquire the holdouts….

One after another, merchants said they need more than just a few months to make a life-altering decision on whether to sell their properties and more information about the arena plan itself. They said they were given little information and inadequate offers of relocation assistance.

“Are you going to relocate my business, are you going to take care of my family, are you going to take care of my livelihood?” said Chong Lee, who operates New York Fashions on Hamilton Street.

In March, Pawlowski’s administration began approaching landowners with property in the one-block footprint of the arena between Hamilton, Linden, Seventh and Eighth streets with offers to buy their buildings. About half have cut deals with the city.

Pawlowski hopes to build a sports and entertainment complex centered on an $80 million to $100 million hockey arena that would be home to the minor league Phantoms, the farm team for the National Hockey League’s Philadelphia Flyers.

As is often the case, city officials are defending the use of eminent domain on the grounds that it will produce economic benefits for the community. However, as Kelo v. City of New London and many other cases show, such condemnations often destroy far more economic value than they create. In addition, numerous studies show that public subsidies for sports stadiums routinely fail to promote economic growth. This is true even of stadiums that house popular major league teams, much less minor league facilities like the one planned for Allentown.

The proposed Allentown taking may also run afoul of Pennsylvania’s post-Kelo eminent domain reform law, which forbids most takings that transfer property to a “private enterprise,” unless the land in question is “blighted” in tightly defined sense of the word (unlike the extremely broad definitions of “blight” that continue to prevail in many states, such as New York). I have seen downtown Allentown and it is clearly not blighted, as defined by the new law.

Unfortunately, Pennsylvania’s law has a crucial loophole that excludes the area around Pittsburgh and Philadelphia until 2012. But Allentown is probably too far from Philadelphia to be covered by that exception, though I welcome correction by experts in Pennsylvania law on this point.

I can’t make a definitive judgment about the legality of the proposed Allentown condemnation without knowing more about the details of the plan. But my initial impression is that it’s probably illegal under Pennsylvania’s post-Kelo reform law. Legal or not, the Allentown plan is yet another example of a dubious economic development taking that is likely to harm the community far more than it benefits it.

UPDATE: This story suggests that the new arena may be publicly owned, in which case it would not violate the post-Kelo eminent domain reform law. However, the same story and previous reports indicate that the development plan may include privately owned facilities and that the arena could be controlled by a private developer. Currently, the Allentown Economic Development Corporation, a private organization, is trying to acquire property for the arena, using the threat of eminent domain as leverage. If the AEDC is to be the owner of the arena, it would not qualify as a publicly owned stadium. We may not know whether the plan is legal or not until it becomes clear who will ultimately own and control the arena.

The Institute for Justice has won a victory in an important property rights case in National City California. The trial judge set aside the city’s “blight” designation of a massive area including almost 700 properties. Had the designation survived, it would have enabled the city to condemn any of these properties at will. Here is IJ’s statement on the case, and here is an article in which city officials seek to downplay the damage.

For reasons, I discussed in this post, the National City case is a particularly egregious example of the widespread phenomenon under which local governments use of dubious blight designations to condemn property and transfer it to politically influential developers and other interest groups. The City declared a vast area to be “blighted” on the basis of extremely dubious evidence, and then refused to even make the evidence available for public scrutiny.

The problem of blight condemnations is far from limited to California. In numerous states, broad definitions of “blight” have undermined post-Kelo eminent domain reforms supposedly intended to protect property owners against eminent domain abuse. If pretty much any area can be declared blighted and condemned, no one’s land is safe unless, of course, they have a lot of political clout.

The trial court ruling is only the first step in an ongoing legal battle. California courts are historically very deferential to blight condemnations, and it’s certainly possible that the trial court will be overruled, at least on some issues.

I may have more to say on this subject later. But for now, I must conclude, as my laptop battery is running low, while I wait for my connecting flight to Istanbul at the Vienna airport.

CONFLICT OF INTEREST WATCH: I have done pro bono work for the Institute for Justice on various other property rights cases. But I have not had any involvement with this one.

As part of his plan to address California’s fiscal crisis, liberal Democratic Governor Jerry Brown has proposed abolishing California’s 400 local “redevelopment agencies,” which would save the state some $1.7 billion per year, an important step towards closing the state’s $25 billion annual deficit. Unfortunately, his plan has so far been stymied by opposition from California Republicans, all but one of whom voted against it in the California Assembly. Under the California state constitution, passage of the bill requires a two thirds majority in the state Assembly, and Brown fell one vote short.

The GOP’s stance on this issue is extremely unfortunate, and at odds with the Party’s supposed devotion to free markets and property rights. As Steven Greenhut, an expert on California property rights issues points out in a recent Wall Street Journal op ed, the redevelopment agencies are notorious for their abuses of the power of eminent domain for the benefit of powerful private interest groups:

[I]n the last 60-some years, redevelopment agencies have become fiefdoms that run up enormous debt and abuse eminent domain by transferring private property to large developers promising to build tax-generating bonanzas. Today, there are 749 such projects. In the late 1950s, there were only nine. According to the state controller, redevelopment agencies consume about 12% of all state-wide property taxes—money that would otherwise go to critical public services….

Palm Desert’s redevelopment agency proposed to eliminate so-called blight by spending nearly $17 million on revamping a municipal golf club that remains one of the nation’s premier golfing locales.

In the 12 years I’ve spent reporting on this issue, I’ve seen an agency attempt to bulldoze an entire residential neighborhood and transfer the land to a theme-park developer. I’ve witnessed agencies declare eminent domain against churches—which pay few taxes—in order to sell the property at a deep discount to big-box stores that promise to keep city coffers flush. Working-class people and ethnic minorities often are the victims of this process since they often live in the vulnerable neighborhoods, and they have less muscle than big business developers.

The trouble is that blight is an amorphous concept, easily abused by government officials and redevelopment agencies. Once “blight” is found, the agency creates a project area and can then begins selling bonds (incurring debt) without a public vote. In 1995, one area of the city of Diamond Bar, where I lived, was declared blighted because there was chipped paint on some buildings….

While economic development and local control are crucial issues, it’s hard to understand why any Republican would believe that a regime of government planning and subsidy is the best way to achieve those goals. They should be standing up against the abuses of property rights and the fiscal irresponsibility inherent in the redevelopment process and championing market-based alternatives to urban improvement—even if it means defending a proposal from a Democratic governor they often disagree with.

As I have often pointed out in previously, dubious “blight” condemnations are one of the most serious threats to property rights in the United States today. They are especially likely to be used to victimize the poor, ethnic minorities, and the politically weak.
For these reasons, among others, Jerry Brown’s proposal should be supported not only because it will save the state money, but because it will protect vulnerable property owners against abusive takings. It’s also worth noting that these kinds of blight condemnations not only cause great harm to their victims, but also generally fail to produce the economic growth that supposedly justified them in the first place.

Overall, I have been skeptical about the prospects for “liberaltarianism,” the proposed political coalition between liberals and libertarians. On this issue, however, the two groups have an obvious common interest. The libertarian goal of protecting property rights overlaps here with several liberal objectives, including helping ethnic minorities and supporting one of the nation’s most prominent liberal governors.

Ilya Shapiro (no relation) has a good post detailing two important new eminent domain cases. Both are being contested by the Institute for Justice, the libertarian public interest law firm that litigated Kelo v. City of New London and many other important property rights cases.

The National City case from California is yet another egregious instance of the abusive use of “blight” takings: The City has declared a large area “blighted” on extremely dubious grounds in order to transfer the land to an influential developer who wants to build luxury condos there. It was described in greater detail in this 2007 Sports Illustrated article.

CONFLICT OF INTEREST WATCH: I have done pro bono work for IJ on a number of other property rights cases, though not these two.

This Friday, I will be speaking at an academic conference on eminent domain in New York at Fordham Law School, 140 W. 62nd Street. The event is sponsored by the Fordham Urban Law Journal. My panel will be at 10 AM, and I will be speaking about the New York Court of Appeals controversial recent blight condemnation decisions in the Atlantic Yards and Columbia cases.

The conference will also include presentations by many well-known property scholars, including Michael Heller, Lynne Sagalyn, Chris Serkin, and my colleague Steve Eagle.

This Wednesday, I will be giving two talks in Madison, Wisconsin. One, sponsored by the Federalist Society Lawyers Division, will be at a panel on the Obamacare individual mandate litigation. The other two panelists are Wisconsin Attorney General J.B. Van Hollen (Wisconsin recently became one of the 28 states challenging the mandate in court) and Democratic state representative Jon Richards, who will defend the constitutionality of the mandate. It will be held at 11:30 AM. Logistical details available here.

My second talk will be at 6 PM at the University of Wisconsin Law School, in the Lubar Commons, and is sponsored by the Law School student Federalist Society chapter. It will be about Kelo v. City of New London, post-Kelo eminent domain reform, and recent judicial decisions on takings, especially the two big New York Court of Appeals decisions (the Atlantic Yards and Columbia cases).

VC readers are more than welcome to come to either or both events!

The December 2010 issue of Engage features not one but two items written by members of the Somin family: a debate on Kelo v. City of New London and eminent domain reform between University of Chicago Law Professor (and former Dean) Saul Levmore and myself; and an article on Title IX and women’s sports written by my wife Alison, who is a special assistant at the US Commission on Civil Rights.

The debate between Dean Levmore and myself was held at the University of Chicago in February. A podcast of the entire debate (including audience questions not reprinted in Engage) is available here.

There is some irony in the fact that Alison is the first of the two us to publish an article about sports, even though I am a big sports fan, and she – to greatly understate the contrast – definitely isn’t. I will have to publish a sports article of my own as soon as possible in order to restore my standing as the resident sports geek in our household.

Although conspiracy theorists (perhaps even Volokh Conspiracy theorists) will never believe it, the appearance of our two pieces in the same issue of Engage is entirely coincidental. The journal editors asked me for permission to publish the debate with Dean Levmore long after Alison’s article was already in the pipeline. But of course that’s exactly what conspiracy-mongers would expect me to say in order to divert attention away from the successful completion of the first stage of the Somin clan’s plan for world domination!

Sadly, the Supreme Court has refused to hear the Columbia University blight takings case. This New York state supreme court decision was a particularly egregious instance of the abuse of “blight” condemnations to take property that was not blighted in any meaningful sense and transfer it to a powerful private interest group. I wrote an amicus brief on behalf of the Cato Institute, Institute for Justice, and the Becket Fund for Religious Liberty urging the Court to take the case. As we pointed out in the brief, the case represented a valuable opportunity for the Court to clear up the massive confusion in state and federal courts over the issue of what qualifies as an unconstitutional “pretextual taking” – a condemnation where the official rationale is a mere pretext for a scheme to benefit a private party. Even in Kelo v. City of New London, the Supreme Court emphasized that such pretextual takings are still forbidden by Public Use Clause of the Fifth Amendment. But it gave very little guidance on the question of what counts as “pretextual.”

I share Megan McArdle’s frustration about the Court’s refusal to take the case. But I do quarrel somewhat with her lament that “this is an issue that only fires up libertarians.” Among the amicus briefs urging the Court to take the case was this one, by liberal Democratic New York state Senator Bill Perkins, a prominent critic of eminent domain abuse in the state. The Becket Fund, one of my own clients in this case, is certainly not a libertarian organization. More broadly, among those strongly opposing the Kelo decision were such liberal groups and activists as the NAACP, the Southern Christian Leadership Conference, Ralph Nader, Howard Dean, and Representative Maxine Waters, as well as various conservatives. It is certainly true that libertarians have been the leaders in the campaign to protect property rights against eminent domain. But concern about the issue is hardly limited to us, and it is not too late to form a broad cross-ideological coalition to address it.

Kelo v. City of New London, which ruled that government has the power to forcibly transfer property from one private owner to another in order to promote “economic development,” was one of the most unpopular decisions in the history of the Supreme Court. Polls conducted soon after the decision was issued in 2005 found that over 80% of the public opposed it.

Recent survey data compiled by Stephen Ansolabehere and Nathaniel Persily as part of a general study of public attitudes on constitutional issues sheds new light on public attitudes towards Kelo. The study, which is based on a poll taken in July 2009, finds that the public remains just as strongly opposed to economic development takings as in 2005. But it also indicates considerable public ignorance about the Court’s decision.

Question 215 in the 2009 survey asked respondents the following:

Governments sometimes use the power of eminent domain to acquire a person’s property at a fair market price for other uses. Recently, a local government transferred someone’s property to private developers whose commercial projects could benefit the local economy. Do you think the local government should be able to use eminent domain for this purpose or not?

This wording is quite favorable to the pro-Kelo side. It mentions the rationale for the taking (“benefit [to] the local economy”) and notes that the owners will get a “fair market price.” Respondents who are not experts in this field might believe that the latter actually means a “fair price” that takes account of the full extent of the owners’ losses, even though it only actually means “fair market value,” which is often not enough to fully compensate owners for the loss of “subjective value.” On the other hand, the question doesn’t mention any of the arguments against such takings, such as the strong likelihood that they will destroy more economic value than they create. Nonetheless, 81% of respondents said that government “should not be able” to engage in economic development takings, while only 16% concluded that it should have the power to do so. There was little disagreement between respondents with different partisan commitments or ideologies. This is almost exactly the same result as in the 2005 surveys. It suggests that public opposition to economic development takings is not a temporary artifact of the Kelo backlash, nor is it the product of question wording that favors opponents.

On the other hand, Question 301 in the same survey found that only 42% realized that the Court ruled that economic development takings were permissible, while 14% thought that the Court had ruled the other way and 43% were not sure. These figures likely overstate the true degree of public knowledge of Kelo because some people probably hit on the right answer by guessing without actually knowing it (a random guesser had a 50% chance of getting the right result). Previous research shows that a substantial minority of survey respondents prefer to guess rather than admit ignorance. Individuals who don’t even know which way the Court ruled in Kelo are probably also unlikely to keep track of post-Kelo reforms. As I argued in this article, this kind of public ignorance helps explain why so many of the latter have been ineffective. A 42% rate of correct answers is higher than we would get for most Supreme Court decisions. It also beats the mere 21% who knew (in a 2007 survey) whether their states had enacted post-Kelo reforms, and the mere 13% who both knew that and whether their state’s reforms were likely to be effective. But the 42% figure is still unimpressive for a ruling that drew such widespread press coverage and political opposition.

I do not believe that the strong public opposition to Kelo by itself proves that the case was wrongly decided or even that economic development takings are bad policy. After all, I have repeatedly argued elsewhere that public political attitudes are often the result of ignorance and irrationality. Nonetheless, the depth and persistence of public opposition to economic development takings is interesting, as is the extent to which it is coupled with widespread ignorance about the issue.

I recently wrote an amicus brief urging the Supreme Court to hear the Columbia University blight takings case, on behalf of the Institute for Justice (the public interest law firm that litigated Kelo v. City of New London, among many other important property rights cases), The Becket Fund for Religious Liberty, and the Cato Institute. The brief is available here. As I explained in this post, the New York Court of Appeals’ decision in the Columbia case is an extreme example of a very common problem: the use of dubious “blight” condemnations to transfer property from the politically weak to the locally powerful interest groups – in this case a major university.

The case also represents an important opportunity for the Court to address a major unresolved issue in eminent domain law. In Kelo, the majority ruled that “economic development” counts as a public use that justifies the use of eminent domain to transfer property to private parties. But the Court also noted that “pretextual” takings – condemnations where the official rationale is “a mere pretext…. when [the] actual purpose was to bestow a private benefit” – are unconstitutional. Unfortunately, the Court was extremely unclear about what qualifies as a pretextual taking. As we explain in Part I of the brief, lower federal courts and state supreme courts have been all over the map in trying to develop rules for what counts as a pretext. The New York Court of Appeals decision in the Columbia case is at an extreme end of a continuum, defining pretext so narrowly that it is almost impossible to imagine a successful pretext case. Other courts – including the supreme courts of Pennsylvania, Hawaii, Rhode Island, and the District of Columbia, and the federal Ninth Circuit – have defined pretext more broadly. But they disagree among themselves about what kind of evidence matters.

The Columbia case is particularly notable because it features all four of the factors that the Supreme Court and various lower courts have said might prove the presence of a pretextual taking: evidence of pretextual motive, benefits that flow primarily to a private party, an identifiable private interest that benefited from the taking whose identity was clear in advance, and the absence of a thorough and unbiased planning process. For details, see pp. 12-18 of the brief. For this reason, it’s a great opportunity for the Supreme Court to determine how important each factor is, and establish a clear rule for lower courts to follow.

Legal journalist Damon Root, who has written several articles about the case, has a good discussion of its connection to the pretext issue here (though he errs slightly in regarding Justice Kennedy’s concurring opinion in Kelo as binding, since Kennedy also joined the majority opinion; regardless Kennedy is certainly a key swing voter on property rights issues).

Ilya Shapiro (no relation), who helped out with the brief on behalf of Cato, has a post about it here.

UPDATE: The Pacific Legal Foundation has also filed a brief urging the Supreme Court to hear this case. It is available here.

For those who might be interested, I will be speaking at Lewis & Clark Law School in Portland, Oregon tomorrow. The topic is my work on Kelo v. City of New London and post-Kelo eminent domain reform. I will also touch briefly on post-Kelo developments in state constitutional law on public use issues, including the Atlantic Yards and Columbia University decisions, the two important recent eminent domain cases decided by the New York Court of Appeals.

The talk will start at noon in Room 2.

A few conservative commentators have advocated using the power of eminent domain to take the land on which the “Ground Zero mosque” is scheduled to be built (see here and here). The idea seems to have originated with New York Republican gubernatorial candidate Carl Paladino.

Legally, such a taking wouldn’t be as simple as Paladino seems to think. If New York state government tries to condemn the land in question, it will have to either admit that the true purpose is to prevent the construction of a Muslim facility, or concoct some other rationale to hide its motives. If the government is honest about its purposes, the proposed taking would almost certainly violate the owners’ First Amendment rights to freedom of speech and religion, for reasons senior Conspirator Eugene Volokh outlines here.

If, on the other hand, the government tries to put together an alternative justification for the condemnation, it runs into a different problem. Even under the otherwise highly permissive Kelo decision, the Supreme Court has said that “pretextual” takings (condemnations where the officially stated purpose is just a pretext for some other agenda) are forbidden. What exactly counts as a “pretextual” taking after Kelo is a matter of great dispute, one that has divided lower courts (see this excellent article by Daniel Kelly for the details). Nonetheless, there is a good chance that a transparent effort to cloak an effort to suppress unpopular speech or religious observances in some construction project would be viewed with suspicion by courts.

The state government could reduce the risk of having the taking declared pretextual if it condemned the entire area around Ground Zero and turned it into some sort of memorial. This is essentially what the federal government has done with the area around the site where Flight 93 crashed in Pennsylvania. In that event, it would be far more difficult to argue that the official justification for the condemnation of the Muslim property was a pure pretext for getting rid of a Muslim religious facility. After all, many other owners would have lost their land as well, most of them presumably non-Muslims.

However, the area around Ground Zero is extremely valuable and contains numerous businesses and other facilities, including some that have politically influential owners. Condemning it all would be extremely costly and would give rise to enormous political opposition. It is therefore highly unlikely that the state will choose to condemn the entire area merely to get rid of the “Ground Zero Mosque” (which is actually neither a mosque nor on Ground Zero). When and if Paladino becomes governor, I doubt that even he would find such a plan to be politically palatable.

Legal issues aside, condemnation of the “Ground Zero Mosque” is a terrible idea. One of the important benefits of property rights is that they allow unpopular minority groups to express their views and live by their own values in peace. I have previously emphasized this point here, and here.

I don’t think the sponsors of the “Ground Zero Mosque” are radical Islamists or supporters of terrorism; indeed, many of the real Islamists claim that the project is a “Zionist conspiracy.” But the Cordoba Initiative leaders do have some abhorrent views on terrorism and related issues. That, however, is not sufficient reason to deprive them of their property rights. If it were, the property rights of many unpopular groups would be put at risk. As New York Mayor Michael Bloomberg puts it, “The simple fact is, this building is private property, and the owners have a right to use the building as a house of worship, and the government has no right whatsoever to deny that right.”

There is some irony in the fact that New York City Mayor Michael Bloomberg has eloquently defended the property rights of the “Ground Zero Mosque” owners even though he recently presided over gross abuses of property rights in the Atlantic Yards and Columbia University cases, among others. He strongly supported both of these extraordinarily dubious takings. Still, Bloomberg’s hypocrisy doesn’t make him any less right about the Ground Zero controversy.

UPDATE: From media accounts, it is hard to tell whether the planned Cordoba Islamic Cultural Center actually includes a mosque or not. Therefore, I may have been too quick to conclude that there is no actual mosque involved. Whether there is going to be a mosque or not perhaps depends on one’s definition of “mosque. ” As far as I can tell, the Center will have an area devoted to Muslim prayer, but that area may not amount to a full-blown mosque, just as a Christian prayer room isn’t necessarily a church. Be that as it may, none of the arguments in my post turns on the question of whether the Cultural Center will actually include a mosque or not.

UPDATE #2: The Cordoba Initiative website states that the planned facility will include “a mosque, intended to be run separately from Park51 [the planned community center] but open to and accessible to all members, visitors and our New York community.” So maybe there will be a mosque after all, though the Cordoba website isn’t very clear on the issue of exactly what that entails. In any event, as I emphasized above, the presence or absence of a mosque doesn’t make any difference with respect to the points I’m making.

Historian David Beito, chair of the Alabama Advisory Committee to the US Commission on Civil Rights, has an interesting post documenting the abuse of “blight” condemnations in Montgomery, Alabama:

“[E]minent domain through the back door” has become commonplace in Montgomery, the cradle of the modern civil rights movement. Under this system, Montgomery has demolished homes without the normal due process of conventional eminent domainand often gives little notice. The city alleges that these homes are “blighted” but, as the story on Jimmy McCall shows, at least some are in excellent repeir.

Typically, under eminent domain through the back door, the city of Montgomery bills the owner for the cost of demolition and he or she is left with an essentially worthless property. The victims are often low-income blacks, many of home live near or in Rosa Parks old neighborhood.

Beito and I described the broader implications of these kinds of takings in this 2008 op ed. Unfortunately, abusive blight takings are not confined to Alabama. They are a serious problem in many parts of the country. For example, New York’s highest court recently upheld two such condemnations in the Atlantic Yards and Columbia cases. Unlike many other states, Alabama has actually passed a fairly strong post-Kelo eminent domain reform law that defines blight relatively narrowly and forbids condemnations that transfer land to private owners for pure “economic development” purposes (see my analysis of that law and other states’ reforms this article). Unfortunately, sometimes the law on the books is one thing and enforcement is another.

In an exchange with Republican Senator Charles Grassley yesterday, Elena Kagan made some interesting comments on property rights and the controversial Kelo decision:

GRASSLEY: …. I want to start with private property.

The takings clause of the Fifth Amendment states, “Nor shall private property be taken for public use without just compensation.” The plain language of the Constitution says an individual’s property shall not be taken for public use.

Yet, the majority of the Supreme Court case in Kelo wrote that the government could take a person’s private property for public purpose, not using the word “use,” which they determined included private redevelopment of land.

Do you believe that the Supreme Court correctly decided the Kelo case or do you believe that the Supreme Court improperly undermined constitutionally protected private property rights?

KAGAN: Senator Grassley, it was obviously a very controversial decision that has inspired a great deal of action in the state legislatures.

I’ve — I’ve — I’ve not commented on particular cases, I’ve not graded cases, but a few thoughts about Kelo.

Of course, what — what the — what the court in Kelo did was to say that the question of public use was not necessarily use by the public, but instead was use for a public purpose. And the court said that in the context of a taking of property that was done pursuant to a broad-scale urban development plan.

So I think it remains an open question whether that public purpose test would apply in any other context without such a broad- scale urban development plan…..

It’s also true — it’s also true that in some sense what the — what the — what the court did in this area when it said this was to kick the question back into the political process. In other words, the court didn’t say, of course, that the government had to do such takings. What the government said was that a state was permitted to do so.

And what states have done in the wake of that decision, in a — in a — in a very striking manner, I think, is to say, “Thanks, but no thanks, you know. We don’t want that power. We don’t want to be — we don’t want to do this. We think doing this, taking property from one person to give it to another person, even in the context of a broad redevelopment plan, is not appropriate public policy.”

And so a number of states, I know — I don’t know the exact number, but quite a number — have passed these kinds of anti-Kelo legislation, which makes sure that the — that the question never arises because the state government doesn’t try to effect such a taking in the first instance…..

GRASSLEY: Under Kelo, the court said that the pretextual (ph) takings are still unconstitutional violation of public use doctrine. Could you give me an example of a condemnation that’s an unconstitutional pretextual (ph) taking?

KAGAN: Gosh, you know, I don’t remember that exact line from Kelo. So I’m a little bit guessing as to the context.

But I think probably what the court meant was a taking that the government does not truly to serve a public purpose, but instead more to give the property to another individual person, the kind of Calder v. Bull scenario, take property from A, give it to B, under the guise of a public purpose.

So I would think that that’s what the court meant, although I don’t recall that exact statement. And I think that that also would provide a limit of the kind you’re speaking about on the doctrine.

GRASSLEY: Can you think of any areas where, in your opinion, the Supreme Court has failed to provide adequate protection of constitutional property rights? And if you can think of any, then I’d like to know examples — or an example.

KAGAN: Well, you know, I’ve tried very hard, Senator Grassley, not to suggest where I see deficiencies with — in — in — in the court’s handling of cases. So I think, you know, I think I won’t answer that question with that degree of specificity.

I mean, it is quite clear that the — that the Constitution does in various ways, and most notably by the takings clause, protect property rights, and that the job of the courts in — with respect to those rights, as any other, is to ensure that government does not overstep its proper bounds.

GRASSLEY: The president who appointed you, in “Audacity For Hope,” his book, said our Constitution places the ownership of private property at the very heart of our system of liberty. Do you agree with that statement?

KAGAN: Well, I do think that property rights are a foundation stone of liberty, that the two are intimately connected to each other in our society and in our history.

I. A Sign of Progress for Property Rights.

Unlike Sotomayor, Kagan does not have an extensive prior record on property rights. The fact that these issues came up in her hearings nonetheless is a further step forward for property rights, on the heels of the extensive questioning of Sotomayor on that subject. Property rights has now become a subject that any Supreme nominee must address. That is a small but genuine sign of progress.

I am happy that Kagan believes that “property rights are a foundation stone of liberty” and that “the job of the courts.. with respect to [property] rights, as any other, is to ensure that government does not overstep its proper bounds.” At the same time, I’m not optimistic that this means she will go against the Court’s oft-repeated pattern of giving property rights far less protection than other enumerated constitutional rights.

II. Kagan’s Discussion of Kelo.

Kagan’s comments on Kelo are reasonable and largely accurate. It’s a substantial improvement over Sonia Sotomayor’s mischaracterizations of the decision during her testimony last year (see here and here).

However, I do have a few bones to pick. First, it is slightly incorrect to state that Kelo said that the “public purpose” test applies only to cases involving “a broad-scale urban development plan.” The Kelo majority opinion was quite clear in stating that the test applies to all takings. Kagan was probably confused by the majority’s statement that “a one-to-one transfer of property, executed outside the confines of an integrated development plan” might not deserve as much judicial deference as one that is part of a plan. However, as the Court emphasized, the “public purpose” test applies even to these types of cases; it’s just that courts might not be as deferential to the government’s claim that a public purpose existed.

Much more importantly, Kagan was wrong to suggest that the existence of a “development plan” is a meaningful constraint on the scope of condemnation authority under Kelo. As I emphasized in this article, virtually all economic development and blight takings are pursuant to some plan or another. Ironically, even 99 Cents Only Stores vs. Lancaster Redevelopment Agency, a California district court cases specifically cited by the majority as an example of an impermissible “one to one taking” was actually part of a redevelopment plan. And the Kelo majority’s refusal to even consider the quality of the plans in question ensures that it is possible for a state or local government to create a “plan” justifying virtually any taking.

I also think that Kagan is a bit too optimistic in suggesting that post-Kelo reform in the states ensures that “the question never arises because the state government doesn’t try to effect such a taking in the first instance.” As I have explained in my academic work on post-Kelo reform, many of these are primarily symbolic and don’t actually restrain condemnations in any significant way. However, Kagan is not an expert on post-Kelo reform and it is understandable that she might not be well-informed about the nature of these laws.

Finally, Kagan and Grassley were right to note that the Kelo majority stated that “pretextual” takings are unconstitutional. What exactly counts as a pretextual taking under Kelo is hotly disputed. For a good discussion, see this article by Daniel Kelly. Justice Sotomayor, the president’s last Supreme Court nominee, ruled in the Didden case that even blatant extortion for the benefit of a private interest doesn’t qualify as a pretextual taking. That was the main reason why I testified against her.

Very extreme cases like Didden aside, the Supreme Court’s broad definition of “public purpose” ensures that even cases of fairly blatant favoritism will often be upheld. It’s easy to claim that almost any taking potentially benefits the public in some sense, especially since the Kelo Court explicitly held that the government has no obligation to prove that the claimed benefits will actually materialize. In Kelo itself, there was a great deal of evidence that the condemnations were undertaken as a result of lobbying by the Pfizer corporation.

Overall, I suspect that Kagan probably thinks that Kelo was rightly decided, and I doubt that she will be a strong protector of property rights on the Court. That said, I think she may turn out to be better on these issues than Sotomayor, and I see no reason to reconsider my view that Kagan is less bad from a libertarian perspective than most other plausible Obama nominees would have been. I am not opposed to her nomination, and what she said in answer to Grassley’s questions doesn’t alter my overall impression of her.

FULL DISCLOSURE: I should mention that a member of Senator Grassley’s staff consulted with me on property rights issues prior to the hearings. However, it is important to emphasize that it was not I who persuaded the senator to question Kagan about either property rights generally or Kelo specifically. Rather, his staff approached me because he was already interested in asking about these subjects, and wanted to go over some details with an outside expert.

UPDATE: I have edited this post slightly to remove some repetitive or non-substantive statements from the exchange between Grassley and Kagan. As per usual practice, I have used ellipses to note my omissions.

In Kaur v. New York Urban Development Corporation, its recent decision upholding the condemnation of property for transfer to Columbia University, the New York Court of Appeals claimed that the use of eminent domain to transfer land to a private university is more defensible than its use to transfer land to commercial corporations, as in the Atlantic Yards case:

Unlike the [New Jersey] Nets basketball franchise [one of the key beneficiaries of the Atlantic Yards takings], Columbia University, though private, operates as a non-profit educational corporation. Thus, the concern that a private enterprise will be profiting through eminent domain is not present. Rather, the purpose of the Project is unquestionably to promote education and academic research while providing public benefits to the local community. Indeed, the advancement of higher education is the quintessential example of a “civic purpose”…. It is fundamental that education and the expansion of knowledge are pivotal government interests.

I think this line of argument is seriously flawed. I tried to explain why in one of my earliest posts on the Columbia University takings back in 2006:

…Columbia President Lee Bollinger and [others] defend the use of eminent domain to transfer property to universities on the ground that universities create “public benefits.” While universities do provide important benefits to society, this does not justify allowing them to condemn property.

Most of the benefits provided by universities are “private goods” that are fully captured by their students and faculty. For example, going to college greatly increases a student’s earning prospects, but that student will himself capture the benefits. Basic economics shows that there is no need for government subsidies for these kinds of private goods.

Universities do also provide some “public goods” – benefits to society that the university, its faculty, and its students cannot fully capture. Perhaps the most important is basic scientific research. Another might be educating underprivileged students, though this is less clearly a public good than basic research is, since most of the benefits are captured by the students themselves. However, both research and student tuition are already heavily subsidized by the government through a wide variety of programs… There is no reason to believe that they require the additional subsidy provided by the use of eminent domain. Even if additional public subsidy is warranted, the best way to provide it is to allocate additional funds earmarked for research or education, not allow universities to use eminent domain. Condemnation of property is rarely if ever actually useful for the purposes of advancing research or educating poor students. In general, research can be undertaken and students educated just as well on voluntarily purchased land. Education and research can be conducted in a wide variety of locations and thus are not vulnerable to the “holdout” problems usually cited as a justification for condemning property. Even if holdouts do become an issue, universities can and do use secret purchase and other market-based methods to get around them without resorting to eminent domain….

Obviously, students and faculty sometimes can benefit from acquiring land through condemnation. But the benefits in question (primarily esthetic and lifestyle-related) are not public goods that should be subsidized by the state. If universities wish to pursue these goals by acquiring additional land, they should do it by competing with other potential buyers in the real estate market.

Finally, a possible argument for allowing universities to use eminent domain is that they supposedly act only for the public interest. As President Bollinger puts it, “We are not a profit-making institution looking out for our own advantage… We are trying to do things that help the world more broadly.” Unfortunately, this claim is at best a half-truth. Universities do sometimes “help the world more broadly,” but their policies are also heavily influenced by the self-interest of faculty, administrators, and…. students. Anyone familiar with academic politics knows that self-interest plays a major role. The mere fact that a university is a nonprofit entity does not prove that it acts only out of altruism. Self-interested behavior by universities is often perfectly legitimate, but it does undercut claims that universities should be allowed to use eminent domain because they do not “look out for [their] own advantage” and only “do things that help the world more broadly.”

Given the Court of Appeals’ ultradeferential approach to blight condemnations, I have no doubt it would have reached the same result even if Columbia were a for-profit corporation. I just wanted to make the point that such judicial abdication does not become more defensible merely because the new owner of the condemned property is a university.

UPDATE: I have fixed what was previously an incorrect link to my 2006 post on this subject.

In today’s decision in Kaur v. New York State Urban Development Corp., The New York Court of Appeals (the state’s highest court) has upheld the condemnation of property in the Manhattanville area of New York City for transfer to Columbia University. This outcome is not surprising. In fact, I predicted it back in December. In the recent Atlantic Yards case, the Court of Appeals had already held that state and local officials could declare virtually any area “blighted” and thereby make it eligible for condemnation and transfer to favored private interest groups.

The problem of over-broad definitions of blight is hardly limited to New York. It is present in numerous other states too, including many that have enacted post-Kelo eminent domain reform laws. Nonetheless, the Atlantic Yards and Kaur cases set a new low in this field. Not only has the New York Court of Appeals applied an extraordinarily broad definition of blight, it has also endorsed blight designations based on studies that are probably rigged in favor of private interests who benefit from condemning the areas in question. Moreover, it has opened the door to condemnations based on the presence of “blight” created by the very people who will get to own the property after it is taken.

UPDATE: Tim Sandefur and the Inverse Condemnation blog have further comments on the decision.

UPDATE #2: Matt Festa of the Land Use Prof blog comments here:

I expected the standard Kelo-style deference to legislative and executive officials to determine what things are in the public benefit (although I thought the Court rather passively accepted the argument that Columbia = education (nonprofit!) and education = good = constitutionally sufficient public benefit). But I was still a little surprised at the extent to which the Court seems to bend over backwards to disclaim any competence at all to evaluate the sufficiency of a “blight” determination by the government (which also gets to decide to use eminent domain). That’s the rational basis test taken to its logical extreme.

Today is the fifth anniversary of Kelo v. City of New London, one of the most controversial decisions in Supreme Court history. In Kelo, a narrow 5-4 majority of the Court ruled that the condemnation of private property for transfer to other private individuals for purposes of promoting “economic development” was permitted by the Fifth Amendment, which allows government to condemn property only for a “public use.” Kelo was a flawed decision and it drew a massive political backlash. There are lesson to be learned from both.

I. The Shortcomings of Kelo.

In my view, Kelo was wrong both because it goes against the text and original meaning of the Constitution and because it embodies an unrealistic view of the political process. On the former point, this article by leading property rights historian Jim Ely does a good job of summarizing the relevant historical evidence. The Founders and early 18th and 19th century jurists disagreed among themselves about the exact meaning of “public use.” But there was widespread agreement that government lacked the power to condemn property owned by one private individuals and transfer it to another merely because the government claimed there might be some sort of public benefit.

Kelo was also mistaken because the majority justices wrongly assumed that the existence of a “plan” would minimize the likelihood that private interests would exploit the condemnation process to take from the politically weak. In reality, the political process makes it very easy for this to happen, as voters have great difficulty monitoring the quality of economic development takings. Moreover, the new owners of condemned property generally have no legal obligation to actually provide the economic benefits that supposedly justified the condemnation in the first place. This predictably results in condemnations that not treat property owners unjustly, but actually destroy more economic value than they create, as happened in the Kelo case itself. I develop these points in greater detail in this article.

More generally, it seems contradictory and self-defeating for courts to allow legislators to define “public use” as they see fit. The whole point of the Bill of Rights is to constrain government power. That objective is undercut if the scope of the rights to be protected is defined by the very government officials whose abuses are supposed to be constrained. It is a bit like appointing a committee of wolves to guard your chicken coop in a world where predation by wolves is the whole reason why you need guards in the first place. As Ely notes, “among all the guarantees of the Bill of Rights, only the public use limitation is singled out for heavy deference to legislatures.” Unfortunately, this is part of the Court’s more general policy of relegating constitutional property rights to second-class status.

II. The Post-Kelo Backlash.

Kelo generated a broader political backlash than any other Supreme Court decision in decades. As I explained in this article, over 80% of the public opposed the decision, and a record 43 states passed eminent domain reforms in the wake of Kelo. Many observers, including legal luminaries such as Richard Posner, argued that this backlash shows that judicial protection for property rights in this field is unneccessary.

Unfortunately, my work on post-Kelo reform also shows that the majority of the new laws provide little or no meaningful protection for property owners. In many cases, they ban Kelo-style takings for “economic development,” but allow the same types of condemnations to continue under the guise of combating “blight.” Blight, in turn, is defined so broadly that almost any area qualifies.

Several factors account for this result, including resistance by interest groups who benefit from unconstrained eminent domain power. In my view, a key problem is widespread voter ignorance that makes it difficult for most citizens to tell the difference between effective reforms and those are primarily for show. Given the overwhelming public opposition to economic development takings, I doubt that interest group lobbying could have prevented strong post-Kelo laws from being enacted if voters had been well-informed about the legislation in question.

The Institute for Justice, the libertarian public interest law firm that litigated Kelo, has a more optimistic take on the results of the backlash in its well-written report on the fifth anniversary of the case. Several of their points are valid. Thus, IJ points out that a number of state supreme courts have recently struck down Kelo-style takings under their state constitutions. This is true, though it’s hard to tell how much of this is the result of Kelo, and how much a continuation of a preexisting trend under which six state supreme courts ruled that way in the ten years before Kelo; with only two (including the Connecticut Supreme Court in Kelo itself) going the other way.

On the legislative reforms, there is perhaps less difference between my assessment and IJ’s than meets the eye. In this article (pp. 15-16), University of Illinois law professor Andrew Morriss has compared my evaluations of the state reforms with IJ’s and finds only three cases where there is a significant divergence (including one – Idaho – where I rated the reform law much more favorably than IJ did). I would perhaps add a couple more cases to this list that arose after Morriss’ paper was finished.

I also agree with IJ that a significant number of states (albeit, in my view, a minority) have passed strong reform laws and that we are today substantially better off than before Kelo. For example, I have long emphasized that reforms passed by referendum initiative tended to be quite strong. The main point of my analysis is to dispute claims that legislative reform is sufficient to address the problem, and take issue with various social science theories that predicted a much more effective backlash.

III. Lessons for the Future.

The Kelo experience offers several valuable lessons. First, there is the need to combine litigation and political action in any reform strategy. IJ and the broader property rights movement could not have been as effective if they had stuck to just one or the other. For example, most of the public would have remained unaware of the problem of eminent domain abuse if not for the media coverage generated by the Supreme Court case. Although preexisting Supreme Court precedent and eminent domain law in most states was even more hostile to property rights than the Kelo decision, the “rationally ignorant” general public was oblivious to this reality.

Second, the shortcomings of the Kelo backlash undercut the widely held belief that we don’t need judicial intervention to protect rights that are supported by majority public opinion. Although bolstered by such authorities as James Madison’s Federalist 10, this view has serious flaws that the Kelo experience highlights. A combination of political ignorance and interest group lobbying can easily lead to violations of rights that majorities value. It also makes it extremely difficult to correct those violations using the political process alone.

On a more positive note, the widespread political reaction to Kelo shows the potential for cross-ideological alliances on property rights issues. Kelo was denounced not only by conservatives and libertarians, but also by numerous left-liberal leaders and activist groups, such as Ralph Nader, Bill Clinton, Maxine Waters, the NAACP, and the Southern Christian Leadership Conference. They recognized that economic development and “blight” condemnations often target the poor and politically weak. It is unfortunate this potential alliance has been allowed to atrophy in recent years. Effective protection for property rights is unlikely to be achieved so long as the issue remains primarily a parochial concern of libertarians and conservatives.

Finally, I can’t resist pointing out that Kelo and the resulting backlash has been a great gift to takings scholars that just keeps on giving. For example, it enabled me to publish numerous articles, get offered various visiting appointments, and ultimately get tenure. I am currently writing a book on Kelo and its aftermath which is scheduled to be published by the Harvard University Press. And I owe it all to the justices in the Kelo majority.

As far as the public interest is concerned, I fervently hope that the the Supreme Court improves its takings jurisprudence. But when it comes to my own career interests, I hope the justices keep up the bad work!

CONFLICT OF INTEREST WATCH: As in previous posts on Kelo-related subjects, I want to note that I have written various pro bono briefs for the Institute for Justice. I also wrote a pro bono amicus brief in the Kelo case itself on behalf of the late Jane Jacobs.

In a recent post on Prawfsblawg, NYU lawprof Rick Hills – a major federalism scholar – argues that federalism concerns justify strictly limiting federal court enforcement of constitutional property rights:

SCOTUS’ decision yesterday in Stop the Beach Renourishment v. Florida Dep’t of Environmental Protection once more illustrates the axiom already established by many other decisions: Absent the sort of majoritarian passion that the Fourteenth Amendment was designed to prevent, SCOTUS cannot, should not,and will not centralize the definition of “property” through a vigorous federal takings doctrine….

I can already hear the protests of my centralizing friends who love “rights absolutism,” declaring that these are matters of federal right that must be defined by federal judges. In my view, this sort of rights absolutism confuses constitutional supremacy and Article III supremacy: Just because a right is a federal right does not mean that it must be defined by federal courts. Indeed, Stewart Sterk has nicely shown that takings rights in particular are permeated with federalism concerns: In cases like Kelo, San Remo Hotel, and Tahoe-Sierra, the feds essentially deputize the state courts to define the scope of federally protected “property….” A majority of SCOTUS will (quite sensibly) not want to be dragged into the minutiae of state property law — or, for that matter, state regulatory policy on guns, state family law on parental powers, and a host of other concerns that are ostensibly the subject of centralized federal rights. This overriding concern of comparative institutional competence, I predict, will lead the Roberts Court will behave exactly as did the Rehnquist Court with takings cases (and, I hope, gun cases, parental rights cases, affirmative action cases, among others): They will defer heavily to state judges about the meaning of “property,” absent some indication that confiscatory minded voters were targeting isolated landowners in a spate of majoritarian greed.

I. Hills’ Argument for Judicial Deference to the States.

Hills’ argument applies not just to federal judicial enforcement of constitutional property rights but to enforcement of almost any constitutional rights against violation by state governments. For example, whether a search is “reasonable” under the Fourth Amendment often turns on highly localized factors that vary much more than state property law does. Local police departments and state courts know far more about these things than federal judges do. Similarly, whether a particular form of speech poses a severe enough threat to public safety to justify restriction will also vary greatly from state to state and locality to locality. Thus, Hills’ position is not just an argument for judicial deference to the states in the property rights area. It’s an argument for judicial deference across the board. I’m not going to generally defend robust federal judicial review of state government actions here, except to say that the admittedly inferior knowledge of federal judges is often outweighed by their superior incentives: they have fewer political ties to the state and local government officials whose actions they are reviewing. Readers who buy Hills’ argument, however, should recognize that it sweeps far beyond property rights.

Hills does make an exception for cases where “confiscatory minded voters were targeting isolated landowners in a spate of majoritarian greed.” But I don’t see why violations of constitutional rights caused by “majoritarian greed” require any greater judicial policing than those pushed through by small but powerful interest groups because the majority of voters are either ignorant about what is going on or indifferent. Many violations of constitutional property rights fall into the latter two categories, as powerful interest groups manage to use eminent domain to condemn the property of the politically weak. Nothing in the text or original meaning of the Constitution distinguishes between those violations of constitutional rights supported by a majority of voters and those instigated by small interest groups or self-dealing government officials. The issues of “comparative institutional competence” that worry Hills are no less present in cases of “majoritarian greed” than in cases where a state or local government violated constitutional rights for some other reason.

II. Do Federalism Concerns Explain the Supreme Court’s Very Weak Enforcement of Constitutional Property Rights?

I also think that Hills is wrong in his empirical claim that federalism concerns explain the Supreme Court’s reluctance to protect property rights. As noted above, the same federalism concerns apply to federal judicial enforcement of many other rights against state governments. Yet the Court is far less reluctant to intervene against the states on those issues.

Moreover, the Supreme Court has taken exactly the same approach in property rights cases involving the federal government. Berman v. Parker – the first case in which the Supreme Court ruled that the Public Use Clause allows the government to condemn property for virtually any reason – involved a federal taking in the District of Columbia.

Finally, it’s worth noting that those Supreme Court judges least willing to enforce property rights have also been the ones most eager to endorse virtually unlimited federal power in cases such as Gonzales v. Raich. This suggests that their commitment to federalism is extremely limited at best.

In sum, bias against property rights, not commitment to federalism, explains the Court’s generally deferential posture in this field, which contrasts sharply with its much more aggressive approach in enforcing “noneconomic” constitutional rights.

III. Why Federalism Doesn’t Provide Reliable Protection for Property Rights.

Hills’ argument does raise an important question: is there a contradiction between my and many other property rights’ advocates support for decentralized federalism on the one hand, and our advocacy of strong federal judicial intervention to protect property rights on the other?

Perhaps we are just hypocritical. But I think there is good reason to be more suspicious of state and local policies on property rights than on many other issues. As I argued in a post explaining my (qualified) support for federalism, the system works best when citizens can “vote with their feet” to escape state and local governments with flawed or oppressive policies. Land, however, is immobile. If states abuse property rights in land, the owner can’t take the land with him and move it to another state. Thus, federalism is much less effective in protecting land and other immobile assets from exploitation by state and local goverments than it is with respect to rights you can “take with you” when you move. I made this argument in greater detail in this article (pp. 221-23)

This also suggests that we need not worry so much about state abuse of property rights in personal property, and I think that is indeed the case. State and local governments almost never condemn mobile property even when the law allows them do so. For example, the City of Oakland famously chose not to condemn the Raiders to prevent them from moving to Los Angeles, even though California courts ruled that it could. Local and state officials know that targeting mobile property is a losing proposition because the owners can so easily move it elsewhere.

Finally, I should note that my argument for federal judicial protection of immobile assets isn’t limited to property rights. For example, prisoners held in state prisons also can’t move elsewhere if state officials abuse their rights. This, in my view, strengthens the case for federal court enforcement of Eighth Amendment constraints on state penal systems.

In a recent post on Kaur v. Urban Development Corporation, the Columbia eminent domain case currently before New York’s state supreme court, NYU lawprof Rick Hills argues that the debate over eminent domain is largely meaningless. Kaur, like the Atlantic Yards case before it, addresses a key issue in takings law: whether the condemnation of “blighted” property for transfer to a private party qualifies as a “public use” under state and federal constitutions even if “blight” is defined so broadly that almost any area can be declared blighted and condemned.

Hills argues that efforts to address this question are ultimately futile and tend to elide the really important issues:

[T]he doctrinal battle… [in Kaur] really is rooted in empty, incoherent blather that can never be a satisfying basis for a doctrine. “Blight” is an epithet in search of a definition, while “public use” is either merely a requirement of public benefit (in which case, it is judicially unmanageable) or a requirement of public title (in which case, it is a perverse encouragement of statist inefficiency).

The concepts of “public use” and “blight” ignore the real and fundamental dilemma raised by over-fragmented land — viz.: (a) land markets tend to do a poor job of re-assembling over-fragmented parcels but (b) assemblers use eminent domain to hog all of the post-assembly surplus, to the justified resentment of the dispossessed owners. Absent some assembly mechanism beyond arms’ length private bargaining, Manhattanville will be locked into drab industrial uses — gas stations, storage facilities, auto repair, etc — that, I strongly suspect, the owners themselves would quickly jettison if they could get a reasonable share of the “post-assembly” value. Getting rid of eminent domain will not vindicate these owners’ private property rights: It will simply insure that they can remain trapped in a collective action problem

Hills’ argument is interesting. But I think it is ultimately wrong on all counts.

I. Why a Narrow Definition of Public Use Does not Lead to “Statist Inefficiency.”

If, as I have advocated, “public use” is interpreted to require either government ownership of condemned property or at least a right of access by the general public (as in the case of land used by common carriers or public utilities), it will reduce “statist inefficiency,” not aggravate it. Such an approach would block takings like those in the Kelo and Poletown cases, where property was taken from politically weak owners for transfer to politically powerful ones. In the process, far more economic value was destroyed than created. In Poletown, for example, some 4000 people were expelled from their homes and dozens of businesses, churches and schools were destroyed, in order to give the land to General Motors to build a factory, which ultimately failed to generate anything remotely approaching the economic benefits that were promised.

Hills’ argument implicitly assumes that if government is not allowed to condemn property and transfer it to private entities, it will simply undertake the exact same condemnations and use the land for the same purposes itself. This, however, is highly implausible. If the whole purpose of the condemnations was to transfer the land to politically powerful interest groups, that objective won’t be accomplished if the government can’t give them the land they covet. If Detroit were forbidden to transfer Poletown to General Motors, it is hardly likely that the city would have still condemned it and then built a government-owned auto factory on the site. Almost certainly, the condemnation would never have been undertaken in the first place.

To be sure, sometimes public ownership can be a mere fig-leaf for control by a private interest group. In my article on Poletown, I discuss the hypothetical possibility of the government retaining ownership of the area, but giving GM a long-term lease for a nominal fee. Effective enforcement of public use limits on takings requires judicial policing of such subterfuges.

II. The Case for a Narrow Definition of “Blight.”

Hills is right to suggest that “blight” is a vague term. Still, it is more than just an “epithet.” As I argue in this article, there is a strong case for using government intervention (though not necessarily condemnation) to eliminate blight defined as conditions on one property that inflict serious harm on the entire neighborhood, for example by spreading disease. If the effects are spread out over a large area, private parties face a collective action problem in trying to alleviate them.

On the other hand, there is no good justification for using eminent domain or other government coercion to alleviate “blight” defined merely as a lesser degree of development than government bureaucrats consider to be desirable. Market competition can generally do a good job of determining which land should be developed and to what extent. Indeed, defining “blight” so broadly that virtually any area can be declared blighted and condemned will actually undermine development by rendering property rights insecure, thereby deterring investment. Such blight condemnations merely enable politically powerful interest groups to take property that they covet from the politically weak.

Even in genuinely “blighted” areas, condemnation is extremely problematic, often leading to the expulsion of poor and minority populations to benefit more influential groups. But the case for government intervention in such areas is at least a plausible one.

III. Why Private Developers (Usually) Don’t Need Eminent Domain to Prevent Holdout Problems.

Hills also makes the standard argument that we need eminent domain to prevent holdouts from blocking valuable assembly projects. I have answered this claim at some length in this article (204-10). Interested readers should also check out this excellent article by Notre Dame property scholar Daniel Kelly. To briefly summarize, Kelly and I point out that private developers can effectively prevent holdouts by assembling property using secret purchases that prevent potential holdouts from learning that a major assembly project is ongoing. Therefore, they cannot use that knowledge to try to extract so large a share of the profit that the project becomes infeasible. This is how Disney assembled the land it needed for Disney World. Of particular relevance to the Columbia University case, it is also how Harvard University has routinely assembled property it needed in the Boston area. Secret assembly doesn’t perfectly solve all holdout problems. But it does work quite well.

Not only does secret assembly alleviate holdout problems, it is also superior to eminent domain because it sifts out those development projects that create more value than preexisting uses of the land in question from those that do not. By contrast, the use of eminent domain often leads to the transfer of land to uses that are actually less valuable than those of the original owners, as happened in both Kelo and Poletown. If the current owners genuinely value the land more than the would-be developer does, we should actually want the holdouts to succeed. This point is well addressed in Kelly’s article.

Finally, I think that Hills also errs in suggesting that the main problem with eminent domain is that current owners don’t get enough compensation for their losses. Owners are indeed often undercompensated. Yet even perfect compensation would not eliminate the danger that unconstrained eminent domain power leads to takings that actually destroy more economic value than they create. The problem is not so much that developers “hog all of the post-assembly surplus,” as we often end up with a post-assembly loss.

UPDATE: At another time, I will comment on Hills’ and Michael Heller’s important and innovative proposal to operate eminent domain through “land assembly districts” that would give greater protection for current property owners than traditional takings. My general view is that LADs would in many places be an improvement over the status quo, but still inferior to strict enforcement of “public use” constitutional limits on takings. I intend to discuss LADs in some detail in the book on Kelo and public use that I am currently writing.

The New York Court of Appeals (which, despite the misleading name, is New York’s state supreme court), held oral arguments yesterday in Kaur v. New York Urban Development Corporation, the case in which New York City is trying to condemn a large amount of property in the Manhattanville neighborhood in order to transfer it to Columbia University. The Columbia Spectator has an interesting summary of the oral argument here.

Columbia and the government’s Urban Development Corporation are claiming that the property can be taken because it is “blighted.” However, a lower court decision recently invalidated the takings because that the studies that supposedly prove the existence of blight are flawed and may have been deliberately cooked up to justify a bogus taking.

I have been very critical of both the Columbia takings specifically (see here for the most recent post and links to earlier ones), and the more general use of broad definitions of “blight” to justify condemnation of virtually any property that might be coveted by politically influential businesses and other interest groups.
At the same time, for reasons I discussed here, I am not optimistic that the Court of Appeals will uphold the lower court’s decision.

In the recent Atlantic Yards case, the court endorsed the constitutionality of condemnations under an extremely broad definition of “blight” that would allow the taking of any property that might be “underdeveloped.” I think the Atlantic Yards decision was badly misguided. Among other things, it grossly misinterpreted the blight provision New York’s state constitution, which only allows condemnation of “substandard an insanitary” areas. Nonetheless, it is difficult to distinguish the Atlantic Yards case from Kaur. However, the Spectator’s description of the oral argument suggests that the judges were tough on both sides, which may indicate that they have some skepticism about the government’s position.

The issue of broad definitions of “blight” is not limited to New York. It undermines protection for property rights in many other states as well. Since the Supreme Court’s controversial decision in Kelo v. City of New London, some 43 states have enacted laws banning or limiting the condemnation of private property for transfer to other private individuals in order to promote “economic development.” Unfortunately, as I explained at length in this article, most of these states’ laws define blight so broadly that virtually any area can still be designated as blighted and condemned. In other words, any property that government might want to take under an “economic development” rationale can instead be taken under a blight rationale.

UPDATE: NYU lawprof Rick Hills comments on the case and the more general questions it raises here. I disagree with several of Rick’s points and will try to address them in a later post, time permitting.

Vanderbilt lawprof James Ely – a leading expert on constitutional property rights – has an interesting column on the relevance of property rights to the current Supreme Court nomination:

In seeking a replacement for retiring Supreme Court Justice John Paul Stevens, President Obama indicated that he wanted to name someone in the Stevens mold. Among the qualities of Justice Stevens that Mr. Obama hoped to find in a successor, the president noted “a keen understanding of how the law affects the daily lives of the American people.”

However, in at least one important area of constitutional law – the rights of property owners – Justice Stevens’ record fell woefully short of protecting the interests of average citizens. In fact, Justice Stevens consistently dismissed property rights claims and voted to strengthen government control over the lives of individuals….

Justice Stevens’ propensity to minimize the rights of property owners was demonstrated vividly in his opinion in the controversial case of Kelo v. City of New London (2005). At issue was a city economic redevelopment plan under which land acquired from residents through eminent domain would be transferred to private parties for the construction of new residences, stores and recreational facilities…. Pfizer Corp. helped instigate the redevelopment plan in the hope that the new facilities would benefit its planned new headquarters. The area slated for redevelopment was a middle-class neighborhood that was not blighted or dilapidated. A few of the neighbors challenged the condemnation on grounds that it was not permissible under the takings clause of the Fifth Amendment, which limits the exercise of eminent domain to “public use.” Writing for the court majority, Justice Stevens rejected this argument and upheld the taking of property for economic development purposes. He stressed heavy deference to governmental determination of what amounted to public use and was especially impressed with the notion that this taking was part of a development plan….

Because Justice Stevens barred courts from attempting to “second guess” the quality of a plan, as a practical matter, municipalities could easily prepare a plan that in reality benefited private interests. There is yet another problem with the Stevens opinion. The very purpose of the Bill of Rights is to safeguard individuals from abuses of governmental power. Broad deference to the officials it is intended to restrain is inconsistent with this purpose.

In Kelo, Justice Stevens virtually eviscerated the public use limitation of the Fifth Amendment at the federal level. Under his reading of public use, legislators appear to have almost unlimited power to take homes and businesses for economic development. The beneficiaries likely will be corporations and others with political clout…..

The framers of the Constitution and Bill of Rights believed that protection for private property was essential for self-government and individual liberty. In sharp contrast, Justice Stevens invariably manifested statist thinking about the property rights of individuals. His legacy is a testament of how far we have wandered from the constitutional vision of the framers.

Hopefully Elena Kagan, Mr. Obama’s nominee to replace Justice Stevens, holds a more balanced view of the importance of property rights in the American constitutional order. As in many other fields of law, however, Ms. Kagan’s record with respect to property rights is a blank slate. It certainly would be appropriate for senators at Ms. Kagan’s confirmation hearing to ask about her thoughts on this subject.

As I have argued previously, there is a potential for fruitful left-right alliances in this area. Many left-wing organizations and activists, including the NAACP, Rep. Maxine Waters, and Ralph Nader, vehemently opposed the Kelo decision because they correctly recognized that giving government unconstrained power to condemn property and transfer it to private parties would tend to victimize the poor, minorities, and the politically weak.

In The Audacity of Hope, President Obama wrote that “[]o]ur Constitution places the ownership of private property at the very heart of our system of liberty…. The result of this business culture has been a prosperity that’s unmatched in human history.” Unfortunately, his first Supreme Court nominee, Sonia Sotomayor, had a very poor record on property rights, as I explained in my Senate testimony at her confirmation hearings.

As Ely points out, Elena Kagan has almost no record in this field. Hopefully, her relative openness to ideas that depart from liberal orthodoxy might come into play here.

In the federal Supreme Court, property rights issues have split the justices along left-right lines over the last thirty years. But as the left-wing reaction to Kelo demonstrates, such a division is not inevitable. In some state judiciaries, liberal judges have voted to enforce tight state constitutional restrictions on eminent domain and exclusionary zoning, a point I discussed in the last part of this article.

If he is so inclined, it is not too late for President Obama to start appointing relatively pro-property rights liberals to the federal courts. Breaking the ideological logjam that has hobbled federal judicial protection of constitutional property rights would be an admirable example of change we can believe in.

UPDATE: Readers interested in this subject should check out Ely’s excellent 2005 article “Poor Relation Once More: The Supreme Court and the Vanishing Rights of Property Owners,” where he critiqued several of Justice Stevens’ important opinions in this area in more detail. Ely’s book The Guardian of Every Other Right is perhaps the best general history of constitutional property rights, and is must-reading for students of the field.

In recent years, the Supreme Court has addressed many cases on property rights issues. But it has done very little with the Just Compensation Clause of the Fifth Amendment, which requires that owners be compensated when their property is condemned by the government. The longstanding rule has been that owners deserve “fair market value” compensation. Unfortunately, studies show that the government often pays much less than the market value. One of the most egregious examples of such undercompensation is the use of the so-called “undivided fee” rule, which holds that the value of a property must be estimated as if it had just one owner, even if in reality it contains multiple property interests. This leads to severely inadequate compensation for leaseholders who pay below-market rents. The value they get for their below-market leases is not captured in the market value of the property as a whole. In the many states that use the undivided fee rule to estimate compensation, such leaseholders often get little or no compensation for the loss of their property rights. The rule, therefore, grossly undercuts the core principle that all owners of condemned property rights deserve “just compensation” under the Fifth Amendment.

The constitutionality of the undivided fee rule is addressed in the recent case of City of Milwaukee Post No. 2874, Veterans of Foreign Wars v. Redevelopment Authority of the City of Milwaukee. The cert petition is available here. I have written an amicus brief urging the Supreme Court to grant cert, on behalf of the Institute for Justice, the public interest law firm that litigated Kelo v. City of New London and many other major property rights cases.

The facts of VFW (described in greater detail in the cert petition) well exemplify the constitutional flaws of the undivided fee rule. In 1961, a local VFW post in Milwaukee sold a property that it owned. As part of the deal, they retained a 99 year lease on the ground floor of the building at a nominal rent of $1 per year, with an option to renew for a further 99 years. They continued to hold meetings and other functions there. In 2001, the City of Milwaukee decided to condemn the property. But the city refused to pay any compensation to VFW for the loss of its valuable leasehold. In a closely divided 4-3 decision, the Supreme Court of Wisconsin upheld the city’s actions because Wisconsin courts follow the undivided fee rule.

In my view and that of IJ, this application of the rule violates both the general constitutional principle of just compensation, and the Supreme Court’s specific formula regulating compensation for the taking of leaseholds. The latter requires that “[t]he measure of damages is the difference between the value of the use and occupancy of the leasehold for the remainder of the tenant’s term, plus the value of the right to renew [if any] … less the agreed rent which the tenant would pay for such use and occupancy.” United States. v. Petty Motor Co., 327 U.S. 372, 381 (1946). Under that measure, Wisconsin courts estimated that the value of the VFW’s interest was $300,000 or more.

As I explained in detail in Part II of the amicus brief, numerous nonprofit organizations, small businesses, and low-income renters find themselves in the same position as VFW. Many of them have leases with below-market value rents. And property occupied by such groups is often targeted for condemnation under “economic development” takings of the kind the Court upheld in Kelo.

Because of the widespread nature of this problem, and the fact that numerous state supreme courts and federal circuit courts have ruled on the issue without coming to any kind of consensus (see Part I of the amicus brief), I hope that the Supreme Court will agree to hear this important case.

CONFLICT OF INTEREST WATCH: I should note that my work on the IJ amicus brief was pro bono, so this post is not an adjunct to a profit-making venture on my part. This was in fact the pro bono project that helped cause my blogging hiatus.

UPDATE: Property rights mavens and blogosphere aficionados might be interested to know that one of the lawyers for VFW is Gideon Kanner, a highly respected property scholar and litigator, and author of Gideon’s Trumpet, an excellent blog focusing on property issues. Gideon has a post about the case here.

UPDATE #2: the Inverse Condemnation Blog has a summary of another amicus brief supporting VFW filed by the National Association of Home Builders and the Wisconsin Building Association.

The last property owner in the condemned Atlantic Yards area of Brooklyn, New York has agreed to sell his land in order to avoid the condemnation of his property by the city government [HT: Josh Blackman]:

The last man standing in front of the Atlantic Yards bulldozer has stepped aside.

Daniel Goldstein — founder of the anti-Atlantic Yards group Develop Don’t Destroy Brooklyn and plaintiff in numerous unsuccessful suits against the $4.9 billion project — has reached an agreement with the project’s developer, Forest City Ratner, to move out of his condo on Pacific Street in Prospect Heights.

Mr. Goldstein confirmed that he would receive $3 million from Forest City. He bought his condo in 2003 for $590,000, but the state seized title to it under eminent domain last month, leaving Mr. Goldstein facing eviction. Mr. Goldstein said he would move by May 7.

He had told The Brooklyn Paper in an article published Wednesday morning that his lawyer would fight the condemnation or “get fair market value and just compensation” for the apartment, as eminent domain law requires when the state seizes property. He had said the state had previously made a lowball offer of $510,000 to him.

Goldstein may have received a higher than market value price for his land in exchange for agreeing not to speak out against the development project anymore:

According to executives who have been briefed on the negotiations, Mr. Goldstein also agreed to a highly modified form of the gag agreement that Forest City had initially imposed on those it bought out, under which he would step down as spokesman for Develop Don’t Destroy Brooklyn.

Mr. Goldstein said that he retains his right to free speech but is no longer allowed to “actively oppose the project.”

“There’s no end to the criticism and opposition to the project,” he said.

The release from Forest City was short on specifics and did not even speak Mr. Goldstein’s name.

“We are not going to discuss the details of the agreement,” Joe DePlasco, a spokesman for the developer, said in the statement.

Goldstein’s land and a great deal of other property in the area was condemned in order to transfer it to politically influential developer Bruce Ratner, under an extremely dubious rationale of alleviating “blight.” I criticized the recent New York state supreme court decision upholding the condemnation in this post; back in 2008, I commented on the federal court decision upholding the condemnation against challenges under the Takings Clause of the federal Constitution.

In my view, that federal decision was probably dictated by the Supreme Court’s 2005 decision upholding economic development takings in Kelo v. City of New London. The state decision, by contrast, was deeply flawed because it was based on a ridiculously broad definition of “blight” according to which virtually any area could be declared blighted and condemned; for reasons I explicate in my earlier post, such blight condemnations almost certainly violate the New York state constitution. Unfortunately, many other states also define “blight” just as broadly. Ultra-expansive definitions of blight have undermined the effectiveness of the majority of the many eminent domain reform statutes enacted since Kelo.

On the plus side, Goldstein’s dogged resistance to these condemnations helped focus public attention on the problem of eminent domain abuse. The state court decision upholding it is an important setback for property rights. However, many other state courts have gone the other way over the last 15 years. During that time, numerous state supreme courts have invalidated Keo-like “economic development” takings under their state constitutions – including Illinois, Michigan, Montana, Ohio, Oklahoma, and South Carolina (see this article for cites to these cases). Only the Atlantic Yards case and the Connecticut Supreme Court’s narrow 4-3 decision in Kelo itself have gone the other way.

UPDATE: Please don’t bother pointing out that the New York state supreme court is officially called the Court of Appeals. I know this, and was using the term “supreme court” as a generic term for the highest court of a jurisdiction. That way, I can avoid confusing readers who are not familiar with New York’s extremely confusing terminology.

UPDATE #2: Goldstein has issued this statement about the agreement, in which he denies agreeing to stop criticizing the Atlantic Yards takings and development project [HT: Scott Bullock]:

Contrary to press reports I have not given up my First Amendment rights or my involvement with Develop Don’t Destroy Brooklyn. (Ratner, though he tried to hide it, did require this of nearly all those who sold their homes to him years ago, and they agreed to it.) Ratner and ESDC tried very hard to force me to agree to give up those rights and the work I do with the organization I helped found. It wasn’t enough, I guess, for Ratner to decimate my neighborhood, take my home, and kick me out, they also felt they had to cut out my tongue. For nearly 3 hours of talks mediated by Judge Gerges I refused to accept any kind of gag order. I would not have taken any amount of money to do that, and I did not.

I did agree to give up my title as “DDDB spokesman”, but that’s just a title. And I did agree to remove my name from one outstanding lawsuit which remains in court despite that. Otherwise I can do and say whatever else I want, and my agreement explicitly states that I have maintained my First Amendment rights.

Steve Bainbridge and co-blogger Eugene Volokh ask whether states are permitted to use eminent domain to take federal land. The question is occasioned by Utah’s recently enacted plan to condemn federal land within its territory.

For reasons I discussed in this earlier post inspired by Utah’s plans, the answer is almost certainly no. Indeed, as the Washington Post story linked above points out, the Utah legislature’s “own attorneys acknowledge [that their condemnation effort] has little chance of success.” I can understand Utahns’ frustration with the fact that “[m]ore than 60 percent of Utah is owned by the U.S. government, and policy makers [t]here have long complained that federal ownership hinders their ability to generate tax revenue and adequately fund public schools.” But condemning federally owned land is unlikely to solve the problem.

The Utah House of Representatives recently enacted a law that would enable the state to seize federal land using its power of eminent domain (see also this shorter account) [HT: Edward Lopez]:

Long frustrated by Washington’s control over much of their state, Utah legislators are proposing a novel way to deal with federal land — seize it and develop it.

The Utah House of Representatives last week passed a bill allowing the state to use eminent domain to take land the federal government owns and has long protected from development.

The state wants to develop three hotly contested areas — national forest land in the Wasatch Mountains north of Salt Lake City, land in a proposed wilderness area in the red rock southwestern corner of the state, and a stretch of desert outside of Arches National Park that the Obama administration has declared off-limits to oil and gas development.

Supporters argue that provisions in the legislation that granted Utah statehood allow it to make such a land grab. They also hope to spark a showdown in the Supreme Court that would rearrange the balance of power between states and the federal government.

Some legal experts say the effort is unlikely to succeed, but Republican state Rep. Chris Herrod, one of the authors of the bill, said the state had little choice.

“I love America, and I’m a peaceful guy,” Herrod said, “but the only real option we have is rebellion, which I don’t believe in, and the courts.”

The eminent domain proposal is among the most audacious yet in a state accustomed to heated battles over the two-thirds of its land owned by the federal government.

I can understand westerners’ frustration with federal control of so much of the land in their states. In my view, much of that federal land should be privatized or transferred to state and local governments. However, the use of eminent domain is unlikely to be a good way to address the problem.

Utah Power & Light Co. v. United States, a 1917 Supreme Court decision, ruled that the states cannot use eminent domain or other powers to dispose of federally owned land except in so far as Congress permits them to do so. I think that decision was probably correct. As the Court pointed out, Article IV, Section 3, Clause 2 of the Constitution gives Congress the power to “dispose of and make all needful rules and regulations respecting’ the lands of the United States.” This congressional authority supersedes any contrary state law because of the Supremacy Clause of Article VI. Thus, a federal law assigning federally owned land to a particular purpose such as a National Park supersedes any state law that seeks to take the land and use it for other purposes.

At least some of the Utah bill’s backers are aware of the Supreme Court’s position, and they hope to use the new law to generate litigation that will get the Court to reverse it. I’m not opposed to states’ enacting laws they know to be contrary to current Supreme Court doctrine for the purpose of creating test cases. Sometimes, that’s the best way to get erroneous precedents reversed. I doubt, however, either that the precedent in this field is wrong, or that the Court is likely to reverse it any time soon.

Even if states do get the power to take federal land by eminent domain, that may not solve their problems. The federal government could presumably use its own eminent domain authority to take the land back. The result could be a vicious cycle of back and forth condemnations.