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Property
Seized by Eminent Domain Must Remain Public
By MOSHE ADLER
Now, a year since the Kelo vs. New London
case in which the U.S. Supreme Court affirmed that a local government
can take the private property of one person and give it to another,
some members of Congress are getting ready to put up a fight.
U.S. Rep. James Sensenbrenner, R-Wis., has proposed a bill that
would deny federal funds for any project that uses eminent domain
to transfer property from one private party to another. If private
property is taken by eminent domain, it would have to become
public property or there would be no federal funding.
Some local governments, however,
oppose the Sensenbrenner bill. In New York City, for example,
the commissioner for housing preservation and development has
warned that affordable housing and other projects will suffer
if local governments have to maintain ownership of the land that
they take by eminent domain. It would be better to give private
developers full ownership of this land and maintain the method
of private-public partnership, the commissioner argues. The record
of private-to-private transfer and private-public patnerships
in both New York and California provides strong support, however,
to the Sensenbrenner bill.
To alleviate the housing shortage
that followed World War II, the federal government heavily subsidized
the construction of affordable housing with cheap loans -- as
low as 1 percent in many cases -- and with government-subsidized
rents. Local governments did their share by giving developers
private land that was taken by eminent domain for "urban
renewal." These programs did succeed for a while, but now
that apartment rents and real-estate prices are skyrocketing
in many parts of the country, and just when affordable middle-class
housing is particularly needed, the private partners in these
partnerships cannot resist the temptations of going to market.
In New York, Metropolitan Life
Insurance, the owner of Stuyvesant Town, a housing development
that was built entirely on land taken by eminent domain, is exploiting
a provision in the rent-regulation law that will permit it to
raise its rents to market rates. In California, out of a total
of 2,287 federally subsidized housing projects, 271 have already
gone to market, either by prepaying their mortgages or "opting
out" by refusing to renew rental contracts with the government.
An additional 76 projects have announced plans to go to market
soon. Everywhere, anxious tenants see their lives taken over
by the fight to preserve their homes.
The problem with all of these
government projects, obviously, is that their affordability is
not permanent. Yet most local governments are too weak to resist
the pressure from real estate developers, and fix it. In New
York, private-public partnerships still expire after 30 or 40
years. In California, only 1 in 5 "inclusionary housing"
ordinances include a permanent affordability provision. Had these
governments owned the land that these projects were built on,
the problem would have not existed. At the time of lease renewal,
the landlord reigns supreme. The main weakness in Sensenbrenner's
law, therefore, is not in what it tries to accomplish, but in
the fact it will apply only to properties taken by eminent domain.
Those who oppose Sensenbrenner's
law seem to think that the mere mention of public ownership of
land will strike horror in the heart of the public. But public
ownership of land is common in Europe, where cities use it for
the benefit of the public with great success. In Amsterdam, for
example, 90 percent of the land is owned by the city. In Helsinki
and Stockholm, the figure is 70 percent. The land is typically
used in three ways:
* First, to provide affordable
housing. In Amsterdam, 55 percent of the housing is provided
by not-for-profit housing associations.
* Second, the rent for the
land that commercial enterprises pay is adjusted periodically
to reflect the changes in the market value of the land. Hence,
when land prices rise, it is the public that is the beneficiary.
* Third, because the city is
the landowner, it has full control over its use. All too often
in the United States, the public finds that there is nothing
it can do to stop offensive structures that manage to conform
to zoning regulations. In Amsterdam, the city is the landlord,
and, naturally, development cannot take place without the consent
of the landlord.
How does it affect life in
a city where virtually all the land is owned by the government?
In a survey about the quality of life in 350 cities around the
world, New York and Seattle tied for 46th and San Francisco ranked
49th. Amsterdam ranked 13th.
Sensenbrenner's legislation
is the most sensible eminent-domain proposal since the Berman
vs. Parker 1954 decision that permitted private-to-private transfer
of property for urban renewal. Local governments should be its
main supporters. Land that is taken by the government should
belong to the public.
Moshe Adler teaches economics in the department
of urban planning at Columbia. He can be reached via his blog,
www.mosheadler.blogspot.com
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