The Supreme Court’s Kelo 5-4 decision leaves compensation as the only remaining protection of private property. No property owner is any longer secure in his possession of his property if a private developer can convince an eminent domain authority that he can put the property to higher use as measured by projected tax revenues. Kelo’s impact is not generally recognized. Even private property’s most ardent defenders deny the impact of Kelo, which permits the use of eminent domain for private development projects.
Noted libertarian Lew Rockwell, for example, argues that the distinction between public and private use makes no difference to the owner whose property is taken. He also argues that the Kelo decision has already produced its own blowback in the form of twenty-five states and hundreds of localities working to enact laws against the use of eminent domain for private takings of property.
Libertarians are correct that the basic problem is eminent domain, but they are incorrect that the distinction between public and private use is “ridiculous,” and they are wrong in their supposition that state and local laws can offset the impact of the Kelo decision.
The state and local laws to restrict the private use of eminent domain are merely policy statements that the eminent domain authority of the state or local government will not be used to take private property for private developers. A city or county’s policy statement cannot prevent a state or the federal government from exercising eminent domain authority in the local government’s jurisdiction, nor could a state’s policy stop the exercise of eminent domain by the federal government. Moreover, not all of these efforts to restrict the use of eminent domain are succeeding, and those that do can be changed by a majority vote. They do not constitute a constitutional protection of private property.
It is clear that the Kelo decision has greatly diminished the protection of private property. Prior to the decision, there were fewer demands for takings and fewer opportunities for government to use eminent domain powers. The distinction between public and private use of eminent domain restricted its use against private property. The Kelo decision removed this restriction.
The Kelo decision created fundamentally new inroads into private property. Prior to Kelo, zoning authorities could restrict what could be built in specific locations, but they had no power to assemble or disassemble land parcels. Thus has Kelo greatly enhanced the reach of government planning.
The Kelo decision also further corrupts government by creating another avenue of payoffs to public officials in exchange for their power to alter property ownership in behalf of private interests.
Libertarians are correct that the source of the mischief comes from the government’s power to take private property for public use. “Public use” is an elastic concept. Originally, public use meant roads and bridges. With time and technology the concept expanded to electric power companies serving public purpose.
The takings of property were limited to the amount needed to provide a community with transportation or electric power. However, in the 1980s a major new development was initiated by the Metropolitan Atlanta Rapid Transit Authority (MARTA). MARTA was one of the first to condemn more property than it needed to serve “public purpose.” The transit authority reasoned that property surrounding a new transportation station would rise in value because of the increased ease of commuting from the site. The authority decided that since its station was the reason for the rise in property values, it should benefit by condemning property for re-sale after the rise in value. People with condemned property blocks from the new stations sued and lost.
Kelo expands the definition of public use. Condemnation for “public use” is now justified by higher projected tax revenues made possible by condemning low density neighborhoods, for example, and transferring the land to developers who make multi-millions of dollars by constructing high density high rise on the assembled site.
The Kelo decision threatens all private property, especially low density residential neighborhoods that occupy desirable sites. All coastal and waterfront communities, for example, are endangered by the Kelo ruling.
Money is a powerful force. The Kelo decision has made it more powerful.
PAUL CRAIG ROBERTS has held a number of academic appointments and has contributed to numerous scholarly publications. He served as Assistant Secretary of the Treasury in the Reagan administration. His graduate economics education was at the University of Virginia, the University of California at Berkeley, and Oxford University. He is coauthor of The Tyranny of Good Intentions. He can be reached at: email@example.com