Should Homes Get Stronger Protection Against Eminent Domain than Other Property?

Cornell lawprof Eduardo Penalver's praise of California Proposition 99 for claiming to protect homes, but not other property against development takings raises the more general question of whether homes should get more protection against eminent domain than other property. Penalver is perhaps the leading academic advocate of the view that they should (see this article for a statement of his views). I take the opposite position. As a general rule, all property should get the same level of protection against takings, regardless of function.

The standard "subjective value" argument for giving homes a special status in takings law is much less compelling than many believe. And even if homes do have higher subjective value than other property uses, the subjective value problem is only one of many good reasons for restricting takings. The others all apply with equal force to other property uses.

I. Homes and Subjective Value.

The main argument for giving homes special status in takings law is that they have unusually high "subjective value," the benefit that the owner derives from his property over and above its market price. As scholars have long recognized, the use of eminent often destroys subjective value because owners are only compensated for the "fair market value" of the property condemned by the government. Although it's possible to increase the level of compensation above the market price (as is done in Britain and Canada), it's hard to calculate subjective value with any precision. Thus, governments are highly likely to undercompensate the owners of condemned property in cases where the land in question has high subjective value. For this reason, many argue that the law should it make it more difficult to condemn high subject value property than property that has little value to the owners beyond its market price.

Homes, Penalver and others claim, tend to have higher subjective value than other properties. For example, many people have lived in the same house or apartment for years and have a strong emotional attachment to it. Others have strong attachments to their neighborhoods or to friends and relatives who live nearby. This valuable "social capital" might destroyed if they were forced to move.

It is indeed true that homes often have high subjective value. But at the same time, there are many homes that do not. On the other hand, there are many non-residential uses of property that have high subjective value of their own.

People like Susette Kelo and many of 4000 people expelled from their homes in the notorious 1981 Poletown case have lived in the same neighborhood for decades and have strong social ties there. But the Susette Kelos of the world are offset by the many homeowners who are more like me. I've only lived in my current apartment for a few years, don't know most of the neighbors, and attach relatively little subjective value to my condo. In a highly mobile society where many people move regularly, my case isn't that unusual.

By contrast, many non-residential property uses generate as much or more subjective value as most homes do. Perhaps the most common type of property condemned in "blight" or economic development takings is small business property. And many small businesspeople surely attach high subjective value to their businesses. Many would lose a large part of their customer base and community ties if forced to move by eminent domain, and these losses aren't included in the fair market value of the condemned land. Churches and private conservation areas are two other examples of non-residential property uses with high subjective value. Certainly, many churches have value to their clergy and worshippers that go far beyond the market price of their land and physical infrastructure. Both are often threatened by "economic development" condemnations, as Jonathan Adler and I discuss in this article (see also my discussion of the vulnerability of churches to takings in this 2006 post).

In sum, the distinction between homes and other property is a very poor proxy for subjective value. Many homes have little or no subjective value. And many of the most commonly condemned types of non-residential property tend to have high subjective value of their own.

II. Other Reasons for Restricting Takings.

Even if the subjective value rationale for limiting takings does apply more strongly to homes than other properties, there are a large number of other reasons for limiting condemnation that apply equally to all property. I can't possibly discuss all of them here. But my 2007 Supreme Court Economic Review article criticizing Kelo-style "economic development" takings considers several in detail. Among the most important are 1) the tendency of eminent domain to be "captured" by powerful interest groups who use it to victimize the politically weak for their own benefit, 2) the flaws in the political process that make it difficult or impossible for voters to monitor the quality of takings initiated by government, 3) the superior efficiency of the market in allocating land to its most highly valued uses, and 4) the tendency of development takings to cause net economic harm to the very communities they are supposed to benefit. All of these reasons for restricting takings - and a number of others raised in my article - apply just as much to commercial and nonprofit property uses as they do to homes.

Your home should indeed be protected against condemnation like a castle. But so should your business, your church, and any other legitimate uses that you might have for your land.